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Stoneco Ltd Cl A(STNE-Q)

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Why StoneCo Stock Popped 27% This Week

Motley Fool - Thu Nov 16, 2023

Shares of StoneCo (NASDAQ: STNE) are up 26.5% this week as of 2:30 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence. This occurred after the Brazilian fintech company announced strong quarterly results, a new share-repurchase authorization, and impressive forward guidance ahead of its Investor Day presentation.

On StoneCo's impressive quarter and new repurchase authorization

StoneCo's steady march higher this week began on Monday, which marked the first trading session after the leading fintech stock released its third-quarter 2023 results after the market closed last Friday. The company's quarterly revenue increased 25.2% year over year to 3.14 billion Brazilian reals ($645.3 million U.S. dollars), well above estimates for 3.08 billion reals. On the bottom line, adjusted (non-GAAP) earnings more than tripled from the same year-ago period to 1.32 reals per share ($0.27 U.S.), also beating estimates for 1.13 reals per share.

Looking more closely at StoneCo's results, its number of micro, small, and medium-sized business (MSMB) active-payment clients increased 41.7% year over year to 3,279,100. Churn improved across all tiers of clients. MSMB total payment volume (TPV) also expanded 19.9% to 89.6 billion reals, lagging behind its growth in actual clients, given the relative outperformance of StoneCo's "Ton" solution (which focuses on the smaller micro-merchant client base).

StoneCo also began to accelerate disbursements under its recently relaunched credit product, disbursing 101.7 million reals (or $20.9 million U.S.) of new credit to 3,075 clients during the quarter. That brought the company's credit portfolio to 113.5 million reals at the end of Q3.

On Tuesday, StoneCo followed by announcing a new share-repurchase program of up to 1 billion reals. The new authorization replaced a 300 million reals repurchase program announced in early October that the company had already completed.

What's next for StoneCo stock?

Finally, in tandem with StoneCo's Investor Day presentation on Wednesday, Nov. 15, the company announced forward guidance calling for compound annual growth rates (CAGRs) from 2024 to 2027 of 13% for MSMB TPV, 26% for client deposits, 90% for its credit portfolio, and 31% for adjusted net income.

This report also puts StoneCo on track to achieve its first full year of profitability after two straight years of losses. With shares down more than 30% from its August highs -- and with the company's underlying business now effectively firing on all cylinders, once again -- it's no surprise to see StoneCo rebounding so ferociously this week.

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Steve Symington has positions in StoneCo. The Motley Fool has positions in and recommends StoneCo. The Motley Fool has a disclosure policy.

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