StoneCo Plunges 55% in a Year: Buy Now or Wait for a Cheaper Deal?

StoneCo STNE shares have plunged 55.2% over the past year against the Zacks Internet - Software industry’s growth of 31.3% and the broader Zacks Computer & Technology sector’s return of 30.6%.The company has underperformed its industry peers, including Five9 FIVE, Innovid CTV and Smartsheet SMAR, over the same time frame.While Five9 has lost 46% over the past year, CTV and Smartsheet have rallied 114.1% and 17.4%, respectively.The underperformance can be attributed to increased competition from banks moving down market to serve Small and Medium Enterprises.One Year PerformanceImage Source: Zacks Investment ResearchHowever, STNE is benefiting from continued momentum in its primary sectors, notably within the financial services and an expanding credit portfolio.STNE Benefits From Robust Growth in the MSMB SegmentStoneCo’s robust solutions in the financial services segment, particularly its Micro, Small and Medium-sized Businesses (MSMB) offerings, continue to be a major growth driver for its success.STNE’s MSMB segment saw 20% year-over-year growth in total payment volume, reaching BRL 114 billion in the third quarter of 2024. This performance was attributed to strong demand in Brazil’s small business sector where the need for digital payment solutions has been rising rapidly.As a result of this demand, the number of active MSMB clients grew 21% year over year, totaling nearly four million clients. This growth was driven by increased engagement from businesses using StoneCo’s payments and banking solutions.The MSMB take rate reached an all-time high of 2.58% for the quarter, surpassing the annual guidance of 2.49%, due to a stable competitive environment, improved client engagement and a focus on healthy unit economics.The adoption of PIX QR codes in the third quarter of 2024 grew significantly, with volumes increasing by a factor of 2.4x compared to the same quarter last year. The success of PIX, a Brazilian instant payment system, reflects the growing trend of digital payments and the shift toward more efficient, real-time payment methods.STNE Benefits From Credit Portfolio ExpansionStoneCo’s credit portfolio is another area of impressive growth. The credit portfolio grew nearly 30% quarter over quarter, reaching BRL 923 million.The company highlighted that non-performing loan levels remained within its internal risk appetite, indicating effective credit risk management and a strong credit portfolio.STNE continued to focus on merchant solutions, which made up the majority of the credit portfolio. In the third quarter of 2024, STNE launched Giro Facil, a revolving credit facility, and enhanced its credit card offerings, particularly for micro-clients, driving growth in the credit segment.STNE Offers Strong FY24 GuidanceWith a strong foothold in the MSMB and banking segments, an expanding credit portfolio, and innovative fintech solutions, STNE is at the forefront of Brazil’s digital transformation.For 2024, STNE expects MSMB TPV to exceed R$412 billion, suggesting an increase of more than 18% compared with 2023 levels.Additionally, client deposits are anticipated to surpass R$7 billion, reflecting a year-over-year increase of more than 14%. As for monetization, the credit portfolio is projected to exceed R$800 million, showing 2.6 times increase from the previous year’s figure. MSMB take rates are expected to exceed 2.49%, indicating an increase of more than 4 bps.STNE Earnings Estimates Show Mixed TrendFor the fourth quarter, the Zacks Consensus Estimate for revenues is pegged at $621.47 million, indicating a year-over-year decline of 5.25%.The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 35 cents per share, which decreased by a penny in the past 30 days.The Zacks Consensus Estimate for 2024 revenues is pegged at $2.42 billion, indicating a year-over-year increase of 0.17%.The Zacks Consensus Estimate for 2024 earnings is pegged at $1.19 per share, which has decreased 1.6% in the past 30 days.StoneCo Ltd. Price and Consensus StoneCo Ltd. price-consensus-chart | StoneCo Ltd. QuoteFind the latest EPS estimates and surprises on Zacks Earnings Calendar.STNE Shares Trading CheapStoneCo shares are currently trading at a significant discount to the industry average, making the stock more attractive on the valuation front. The Value Score of B suggests STNE is trading at a discount. STNE has a forward 12-month P/S of 0.92X, which is lower than the Zacks Internet - Software of 2.95X and STNE’s five-year median of 2.42X.Price/Sales (F12M)Image Source: Zacks Investment ResearchWhat Should Investors Do With STNE Stock?Despite growth in primary sectors, notably within the financial services and an expanding credit portfolio, STNE is suffering from challenging macroeconomic uncertainties and increased competition in digital payment solutions and the financial services sector, which is negatively impacting STNE’s growth.STNE currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Innovid Corp. (CTV): Free Stock Analysis Report Five Below, Inc. (FIVE): Free Stock Analysis Report Smartsheet (SMAR): Free Stock Analysis Report StoneCo Ltd. (STNE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks