Stoneco (STNE) AI Stock Analysis

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Stoneco

(NASDAQ:STNE)

Rating:61Neutral

Price Target:

$15.00

▲(9.01%Upside)

Stoneco exhibits strong revenue growth and positive technical indicators, but faces profitability and cash flow challenges. While the earnings call was positive, valuation concerns persist due to a negative P/E ratio. Overall, the stock shows potential but requires careful monitoring of profitability and financial health.

Positive Factors

Earnings

The cash sweep strategy could significantly benefit the company's earnings before taxes, potentially lifting adjusted EBT by R$13 million for every R$1 billion net movement from demand deposits to time deposits.

Financial Strategy

The company's recent increased utilization of its SCFI license allows it to offer 'time deposits' to customers, which is seen as a long-term positive change.

Management Guidance

Management remains committed to deliver on its non-GAAP net income guidance, which implies a compound annual growth rate of 25%, and this potential is underappreciated by the market.

Negative Factors

Macroeconomic Risks

There is a downside risk of the stock price reaching $10 in the event of a prolonged macroeconomic downturn.

Market Pressure

Growth and profitability of merchant acquiring will likely come under significant pressure.

Market Share

STNE lost 6 basis points of market share on credit and debit q/q (and lost 26 bp y/y).

Stoneco (STNE) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$3.74B

Dividend YieldN/A

Average Volume (3M)6.28M

Price to Earnings (P/E)8.7

Beta (1Y)1.33

Revenue Growth-14.03%

EPS Growth-167.03%

CountryUS

Employees7,239

SectorTechnology

Sector Strength79

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)0.32

Shares Outstanding254,617,000

10 Day Avg. Volume7,412,587

30 Day Avg. Volume6,284,829

Financial Highlights & Ratios

PEG Ratio0.34

Price to Book (P/B)7.44

Price to Sales (P/S)0.00

P/FCF Ratio-14.57

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$14.29

Price Target Upside3.85% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering7

Stoneco Business Overview & Revenue Model

Company DescriptionStoneCo Ltd. provides financial technology solutions to merchants and integrated partners to conduct electronic commerce across in-store, online, and mobile channels in Brazil. It distributes its solutions, principally through proprietary Stone Hubs, which offer hyper-local sales and services; and technology and solutions to digital merchants through sales and technical personnel and software vendors, as well as sells solutions to brick-and-mortar and digital merchants through sales team. As of December 31, 2021, the company served approximately 1,766,100 clients primarily small-and-medium-sized businesses; and marketplaces, e-commerce platforms, and integrated software vendors. StoneCo Ltd. was founded in 2000 and is headquartered in George Town, the Cayman Islands. StoneCo Ltd. operates as a subsidiary of HR Holdings, LLC.

How the Company Makes MoneyStoneCo makes money primarily through the fees it charges for its payment processing services. This includes transaction fees from merchants who use its POS systems and digital payment solutions. The company also generates revenue through the sale and rental of its POS devices, as well as through subscription fees for its business management software. Additionally, StoneCo offers credit and other financial services to merchants, earning interest income and service fees. Strategic partnerships with financial institutions and technology providers also contribute to StoneCo's revenue by expanding its service offerings and customer base.

Stoneco Key Performance Indicators (KPIs)

Any

Payments: Total TPV

Payments: Total TPV
Measures the total transaction volume processed, indicating the scale of Stoneco's payment operations and its market penetration.

Chart InsightsStoneCo's Total TPV has shown robust growth, particularly in late 2024, but the latest earnings call indicates a potential deceleration due to strategic repricing and macroeconomic challenges. Despite this, the company has exceeded its annual guidance targets, with strong year-over-year growth in key financial metrics and a significant share repurchase program. The increase in MSMB active clients and transaction volumes underscores StoneCo's expanding market presence, although higher financial expenses and sequential declines in some metrics suggest a cautious outlook.

Data provided by:

Main Street Data

Stoneco Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: -0.36%|

Next Earnings Date:Aug 13, 2025

Earnings Call Sentiment Positive

The earnings call presented a generally positive outlook with strong year-over-year growth in key financial metrics, effective capital returns, and growing client engagement. However, some sequential declines in financial performance and anticipated TPV growth deceleration were noted, along with increased financial expenses. Despite these challenges, the company's strategic initiatives and continued focus on profitability suggest a stable future outlook.

Q1-2025 Updates

Positive Updates

Strong Year-Over-Year Growth in Key Financial Metrics

Gross profits grew by 19% year-over-year, with EPS growing by 36% year-over-year, surpassing the 18% growth implied in the full-year outlook. Adjusted net income also grew 23% year-over-year.

Share Repurchase and Capital Returns

StoneCo repurchased R$843 million or 15.1 million shares during the quarter. Over the past 12 months, the company has returned R$2.4 billion in share buybacks, highlighting a strong capital return policy.

MSMB Active Client Base and Engagement Growth

The MSMB payments active client base increased by 17% year-over-year, with the heavy user metric reaching 38%, up from 37% in the previous quarter.

Software Segment Achievements

Software segment revenues grew 11% year-over-year, with adjusted EBITDA growing 12% and a reduction in Software CapEx from 71% of EBITDA to 51% this quarter.

Negative Updates

Sequential Decline in Certain Financial Metrics

Adjusted gross profit decreased by 3% quarter-over-quarter, and adjusted net income decreased by 17% quarter-over-quarter due to lower TPV and higher cost of services.

Anticipated TPV Growth Deceleration

The company expects some deceleration in TPV growth as a result of repricing policies and challenging macroeconomic conditions.

Increased Financial Expenses

Financial expenses increased by 23% year-over-year, driven by higher average CDI during the periods, partially offset by the cash sweep strategy.

Company Guidance

During the first quarter of 2025, StoneCo demonstrated strong financial performance, exceeding its annual guidance targets across several key metrics. Gross profits increased by 19% year-over-year, surpassing the 14% annual growth outlined in their guidance, while adjusted basic EPS grew by 36%, significantly above the expected 18% growth for the year. The company also repurchased R$843 million worth of shares, boosting its distribution yield to 12% over the past 12 months. StoneCo's adjusted net income rose by 23% year-over-year, though it experienced a 17% decrease quarter-over-quarter due to higher investments and tax rates. The company's strategic repricing efforts, which were implemented in response to an increase in the yield curve, resulted in a notable improvement in profitability. StoneCo's client base and transaction volumes, particularly in MSMB payments, also showed robust growth, with MSMB active clients growing by 17% year-over-year. Additionally, the company's credit portfolio reached R$1.4 billion, supported by a stable non-performing loan ratio and a coverage ratio of 256%. StoneCo announced a new R$2 billion share repurchase program, underscoring its commitment to shareholder returns while maintaining a disciplined capital allocation strategy.

Stoneco Financial Statement Overview

Summary

Stoneco shows strong revenue growth but faces challenges with profitability and cash flow management. The balance sheet is stable but needs monitoring for debt and equity trends. Addressing cash flow and profitability issues is crucial for financial health.

Income Statement

Neutral

Stoneco's revenue has shown a positive growth trend over the years, with a notable 16% increase in the TTM. However, the company remains unprofitable with a negative net income, impacting its net profit margin negatively. Gross profit margins are strong, indicating robust core profitability, but the net losses signal challenges in managing expenses or other factors impacting the bottom line.

Balance Sheet

Positive

The balance sheet reflects a relatively stable financial structure with a manageable debt-to-equity ratio. The equity ratio suggests that a significant portion of assets is financed by equity, which is generally positive. However, the declining stockholders' equity and increasing liabilities could pose a risk if not managed properly.

Cash Flow

Neutral

Stoneco's cash flow performance is concerning, with negative free cash flow and operating cash flow in the TTM, indicating cash management challenges. The free cash flow to net income ratio is unfavorable, highlighting the company's struggle to convert profits into cash.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
13.27B	12.74B	11.36B	9.02B	4.58B	3.18B
	Gross Profit
9.76B	9.35B	8.38B	6.35B	2.86B	2.41B
	EBIT
6.44B	6.11B	5.49B	3.71B	1.04B	1.51B
	EBITDA
1.37B	988.16M	3.54B	1.35B	-437.71M	1.72B
	Net Income Common Stockholders
-1.37B	-1.52B	1.59B	-519.42M	-1.36B	854.07M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
7.94B	14.55B	5.66B	8.93B	8.84B	10.58B
	Total Assets
53.93B	54.81B	48.69B	42.25B	42.06B	31.75B
	Total Debt
13.44B	12.90B	5.52B	5.55B	8.36B	6.08B
	Net Debt
7.79B	7.67B	3.34B	4.04B	3.87B	3.64B
	Total Liabilities
42.47B	42.99B	34.02B	29.30B	28.46B	16.76B
	Stockholders Equity
11.42B	11.78B	14.62B	12.89B	13.51B	14.85B
Cash Flow		Free Cash Flow
-1.78B	-4.89B	437.41M	960.44M	2.31B	-398.62M
	Operating Cash Flow
-523.99M	-3.62B	1.65B	1.68B	3.61B	56.48M
	Investing Cash Flow
-1.03B	1.59B	-845.44M	-1.87B	-2.98B	-5.81B
	Financing Cash Flow
2.19B	5.04B	-148.80M	-2.81B	1.42B	7.22B

Stoneco Technical Analysis

Technical Analysis Sentiment

Positive

Last Price13.76

Price Trends

50DMA

13.08

Positive

100DMA

11.42

Positive

200DMA

10.89

Positive

Market Momentum

MACD

0.22

Positive

RSI

53.04

Neutral

STOCH

63.60

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For STNE, the sentiment is Positive. The current price of 13.76 is above the 20-day moving average (MA) of 13.62, above the 50-day MA of 13.08, and above the 200-day MA of 10.89, indicating a bullish trend. The MACD of 0.22 indicates Positive momentum. The RSI at 53.04 is Neutral, neither overbought nor oversold. The STOCH value of 63.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for STNE.

Stoneco Risk Analysis

Stoneco disclosed 91 risk factors in its most recent earnings report. Stoneco reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 3 New Risks

One of our founder shareholders holds a large amount of voting power over our common shares, and as a result has influence over certain of our activities and corporate decisions. Q4, 2022

Any significant disruption to Linx's cloud hosting network infrastructure could damage its reputation, forcing it to provide credits or refunds, resulting in early termination of customer contracts or loss of customers, and adversely affect its business. Q4, 2022

Links depends on telecommunications, internet and data center providers for its Software as a Service (SaaS), Cloud and on-premise infrastructure and any fluctuation or interruption in the provision of these services may impair the provision of services by Linx and affect its profitability. Q4, 2022

Stoneco Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
EVTC	81 Outperform	$2.30B	17.99	24.65%	0.56%	17.39%	100.46%
PAYO	73 Outperform	$2.35B	21.77	15.97%	―	14.86%	-0.94%
DLO	72 Outperform	$2.80B	21.72	26.10%	―	33.84%	0.29%
PAGS	71 Outperform	$2.76B	6.80	14.36%	1.67%	2.38%	9.88%
DOCN	66 Neutral	$2.44B	24.52	-41.63%	―	13.21%	109.61%
Sector *	62 Neutral	$11.80B	10.10	-7.47%	2.99%	7.37%	-8.16%
STNE	61 Neutral	$3.74B	8.73	-8.85%	―	-14.03%	-167.03%

* Technology Sector Average

Performance Comparison

STNE

Stoneco

13.76

1.82

15.24%

EVTC

Evertec

35.89

2.90

8.79%

PAGS

Pagseguro Digital

8.36

-2.86

-25.49%

PAYO

Payoneer

6.51

1.04

19.01%

DOCN

DigitalOcean Holdings

26.78

-8.83

-24.80%

DLO

DLocal

9.81

2.67

37.39%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.