{"id":533871,"date":"2024-06-10T17:16:18","date_gmt":"2024-06-10T21:16:18","guid":{"rendered":"https:\/\/financhill.com\/blog\/?p=533871"},"modified":"2024-06-10T17:18:01","modified_gmt":"2024-06-10T21:18:01","slug":"why-has-stoneco-stock-been-going-down","status":"publish","type":"post","link":"https:\/\/financhill.com\/blog\/investing\/why-has-stoneco-stock-been-going-down","title":{"rendered":"Why Has StoneCo Stock Been Going Down?"},"content":{"rendered":"

Fintech company <\/span>StoneCo Ltd. (<\/b>NASDAQ:STNE<\/b><\/a>)<\/b> is no ordinary Brazilian firm. It delivered such impressive performance that it even attracted the attention of Warren Buffett’s Berkshire Hathaway.<\/span><\/p>\n

With its comprehensive suite of financial technology solutions aimed at small-to-medium sized businesses in Brazil, StoneCo grew rapidly over the past five years. <\/p>\n

It clearly solved a pain point in the market with its point-of-sale hardware and software solutions as well as its credit services and payment processing combination. By helping SMBs to simplify their financial operations, StoneCo was adopted quickly and widely.<\/p>\n

But in recent months the share price has been on the decline leading to concerns that the company’s heyday is in the rearview mirror. Are the worries justified? <\/p>\n

Is The StoneCo Growth Story Ending?<\/b><\/h2>\n

Why has StoneCo stock been going down? Slower top line growth and profitability flipping negative have been the primary culprits leading to StoneCo stock falling.<\/p>\n

Since its<\/span> 2018 IPO<\/span><\/a>, StoneCo has managed to grow its top line each and every year. That year it went public<\/span> it reported revenues of R$1.58 billion ($310.43 million) reflecting a growth rate of 63.1% to year-over-year. <\/span><\/p>\n

The following year, that figure<\/a> had risen to R$2.58 billion ($506.38 million) and by<\/span> 2020<\/span><\/a>, a further 28.9% was reported to R$3.32 billion ($652.59 million).<\/span><\/p>\n

The pandemic years didn’t slow down the momentum much with further 45.3% and 98.8% gains to R$4.82 billion ($948.24 million) and R$9.59 billion ($1.89 billion) in<\/span> 2021<\/span><\/a> and<\/span> 2022<\/span><\/a>, respectively.<\/span><\/p>\n

Last year, the company\u2019s top line<\/a> of R$12.06 billion ($2.37 billion) represented<\/span> 25.7% annual growth. The CAGR of 53.1% over the past three years and 49.4% over the past five years is a clear indicator that StoneCo has been on fire and it’s no surprise when viewing total payment volumes.<\/span><\/p>\n

In 2018 they clocked in at R$83.40 billion ($16.39 billion) and rose to R$129.10 billion ($25.38 billion) in 2019 and further to R$209.90 billion ($41.26 billion) in 2020.<\/span><\/p>\n

Since 2021, StoneCo\u2019s TPV was re-defined and considers all volumes settled by the company. In 2021, TPV stood at R$275.40 billion ($54.14 billion), up 33.4% and then a further gain to R$367.40 billion ($72.22 billion) in 2022 and again by 11.2% to R$408.30 billion ($80.26 billion) last year. <\/span><\/p>\n

It’s clear that the monumental growth has stalled somewhat and this is largely attributable to a lag in its key accounts segment.<\/span><\/p>\n

Profitability Hurdles Plaguing Financials<\/b><\/h2>\n

While revenue growth has been impressive, the same cannot be said about its profitability. <\/span><\/p>\n

The company broke into positive (GAAP-based) net income in<\/span> 2018<\/span><\/a>, posting R$305.23 million ($60 million). <\/span><\/p>\n

The following year, in <\/span>2019<\/span><\/a>, net income more than doubled to R$804.20 million ($158.09 million) and improved further to R$837.45 million ($164.62 million) in<\/span> 2020<\/span><\/a>.<\/span><\/p>\n

However, problems struck in 2021. Brazil\u2019s economic recovery was not especially strong, and at the tail-end of the year, the country\u2019s economy was<\/span> pushed into a recession<\/span><\/a> due to high inflation and interest rates, alongside harsh weather conditions.<\/span><\/p>\n

There was another factor in play that was affecting StoneCo\u2019s credit operations in that year. A<\/span> new registry of receivables<\/span><\/a> was implemented in Brazil to improve efficiency but this led to a temporary stop in credit disbursement and a downward adjustment of estimates on the potential recovery rate from non-performing clients.<\/span><\/p>\n

This was reflected in net income, which turned into a whopping loss of R$1.38 billion ($270.75 million) for the year. The company cited macro problems as a part of this profitability drop but also stated its aggressive commercial approach as another primary cause.<\/span><\/p>\n

The good news for the company remains the fact that its recovery from that low point has been quite good. In the subsequent year, the net loss reduced to R$526.40 million ($103.48 million) and last year, it turned again into an income of R$1.60 billion ($314.60 million), which is higher than any of the preceding years.<\/span><\/p>\n

Fiscal 2022 was a pivotal year for StoneCo, when it evolved its commercial strategy in the MSMB (micro and SMB) unit and tried to optimize its Ton and Stone brands. <\/span><\/p>\n

In 2023, this MSMB-focused strategy was carried forward, and paid off in spades as the company was better able to recognize conversions of TPV into deposits.<\/span><\/p>\n

Is It Time To Buy StoneCo Stock Now?<\/b><\/h2>\n

The growth in StoneCo\u2019s financials underscore the potential of the stock. Beyond the profit-and-loss statement, the company has ample cash (R$5.05 billion or $993.36 million in adjusted net cash as of 2023 year-end), which can position it for further expansion.<\/span><\/p>\n

Management and analysts expect high growth going forward, which is demonstrated by its mid to long-term outlook. In 2024, its MSMB TPV is expected to grow by 18%, and a CAGR of 13% is expected between 2024 and 2027. Adjusted net income is expected to exhibit a CAGR of 31% over the same period.<\/span><\/p>\n

The company\u2019s stock has declined more than 80% since 2021 and so its valuation is quite reasonable at the moment. Its price sits at a meager 1.99 times forward sales. Furthermore, Wall Street analysts see a 17.4% upside in STNE.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Fintech company StoneCo Ltd. (NASDAQ:STNE) is no ordinary Brazilian firm. It delivered such impressive performance that it even attracted the attention of Warren Buffett’s Berkshire Hathaway. With its comprehensive suite of financial technology solutions aimed at small-to-medium sized businesses in Brazil, StoneCo grew rapidly over the past five years.  It clearly solved a pain point […]<\/p>\n","protected":false},"author":2,"featured_media":533875,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[22],"tags":[334,355,820],"class_list":["post-533871","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-ndaq","tag-nwsa","tag-stne"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/financhill.com\/blog\/wp-content\/uploads\/2024\/06\/Untitled-design-2024-06-10T165220.203.jpg","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9czeV-2eSP","_links":{"self":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/533871","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/comments?post=533871"}],"version-history":[{"count":10,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/533871\/revisions"}],"predecessor-version":[{"id":533882,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/533871\/revisions\/533882"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media\/533875"}],"wp:attachment":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media?parent=533871"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/categories?post=533871"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/tags?post=533871"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}