Brazilian software company Totvs said on Thursday it has decided to withdraw from the competitive process to buy StoneCo's unit Linx, according to a securities filing.
I own StoneCo Ltd. for its undervaluation, improving technical trading pattern, and the potential for a stronger Brazilian real against the U.S. dollar in 2025. The stock trades at an ultra-low P/E of 8x, and EV to EBITDA ratio of 1.8x, making it a bargain choice in financial services. Technical momentum appears to have turned high over the past week, after many months of bearish action. Price could run higher over the next month or two.
StoneCo Ltd. (STNE) concluded the recent trading session at $9.37, signifying a +1.52% move from its prior day's close.
Brazil's GDP growth and low unemployment are favorable for StoneCo, despite the country's controversial economic signs and high interest rates. StoneCo's recent financial results were strong, with high margins, good return on capital, and consistent earnings beats, enhancing investor confidence. The company's valuation is attractive, trading below peers, suggesting a potential 18% upside, with momentum in Brazilian assets as a key trigger. So, I am upgrading my recommendation.
StoneCo Ltd. (STNE) concluded the recent trading session at $9.22, signifying a -1.28% move from its prior day's close.
StoneCo Ltd. (STNE) reachead $9.34 at the closing of the latest trading day, reflecting a -0.53% change compared to its last close.
StoneCo Ltd. (STNE) reachead $8.84 at the closing of the latest trading day, reflecting a -0.79% change compared to its last close.
In the latest trading session, StoneCo Ltd. (STNE) closed at $8.58, marking a +1.66% move from the previous day.
StoneCo: A Rare Buying Opportunity (Rating Upgrade)
In 3Q24, STNE's revenue grew 6.91% y/y to R$3.36 billion, with significant increases in payment volume, digital banking deposits, and credit portfolio. Margins slightly deteriorated, with operating margin at 52.79% and EBITDA margin at 60.65%, but net margin expanded due to lower financial expenses. Although Brazil's economy will continue to weigh on the potential of STNE, the company has multiple initiatives to maintain its operational excellence and outperformance.
StoneCo's stock has plummeted 50% over the past year, largely due to rising interest rates in Brazil, not necessarily company-specific issues. Despite the macroeconomic headwinds, StoneCo remains a key financial ecosystem for SMEs in Brazil, offering diverse monetization avenues beyond pure transactions. Q3 2024 results showed a 35% YoY growth in net profit and an 8% YoY increase in revenue, driven by financial services.
STNE saw a decline in TPV in key accounts and a rise in NPL. Yet, growth in banking clients and credit portfolio expansion hint at future recovery.