StoneCo Positioned to Capitalize on Brazil’s Payment Revolution
Company Insight: StoneCo Overview
Zacks Rank #1 (Strong Buy) Stock StoneCo (STNE) is a prominent fintech firm in Brazil, offering a comprehensive cloud-based platform for electronic payments across various channels, including storefronts, mobile, and online. The business can be divided into three key segments:
1. Payment Processing
As a leader in point-of-sale payment processing, STNE enables businesses to accept credit cards, debit cards, and digital wallet payments, similar to Block (XYZ) in the US.
2. Banking Services
Beyond payments, StoneCo supports small and medium-sized enterprises (SMEs) in banking, bill payments, and account management. By leveraging transaction data, STNE assesses creditworthiness to offer loans.
3. Software Tools
Similar to the Canadian giant Shopify (SHOP), StoneCo provides an array of products for effective e-commerce transactions, customer analysis, and management.
Growth Potential in Brazil’s Digital Payments Market
StoneCo presents an opportunity for investors to engage in Brazil’s growing payments market. As the ninth-largest economy globally, Brazil contributes over $2 trillion in annual GDP and is advancing towards a digital economy. Currently, only about 15% of Brazilian consumers utilize digital payments, indicating room for expansion. Statista forecasts a compound annual growth rate (CAGR) of roughly 29% in the Brazilian digital payment market from 2025 to 2029, potentially increasing market size from approximately $300 billion to $900 billion.
STNE: A Track Record of EPS Excellence
StoneCo has a history of exceeding EPS expectations from Wall Street. The company performed above Zacks Consensus Estimates in twelve out of the past thirteen quarters. Last quarter, despite challenging macro conditions, STNE surpassed expectations with a 21.88% positive EPS surprise, signaling growing business momentum.
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Attractive Valuation for Future Growth
Following a more than 15% increase in earnings, STNE shares remain relatively inexpensive, trading at a forward P/E ratio of approximately 8x EPS.
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Positive Technical Momentum
The technical outlook for STNE aligns with its robust fundamentals. Following the latest earnings results, shares surged past the 200-day moving average, marking a breakout from a multi-week consolidation phase.
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Conclusion
With its extensive fintech offerings, consistent earnings performance, and favorable valuation, StoneCo presents a viable investment opportunity amidst Brazil’s digital payment transformation.
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This article originally published on Zacks Investment Research (zacks.com).
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