StoneCo (STNE) Soars 38% on Strong Q1 Outlook, Will the Rally Last?

Trade STNE Stock Your Capital Is At Risk
Ollie Martin
Updated: 18 Mar 2022

Key points:

  • After losing 80% of stock value over 2021, StoneCo pulls through with a solid quarter
  • Investors look towards Q1 projections, which topped analyst estimates
  • The company is focused on improving margins into 2022

The global fintech market suffered over 2021. Investors rotated out of riskier high-growth stocks and found solace in safe havens; indicative of times of panic and uncertainty. Companies have seen off-the-charts depreciation with consistent heavy selling affecting even the largest market caps. 

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Brazilian payment processor StoneCo (NASDAQ: STNE) felt the full brute force of the market sell-off, losing almost 80% of its stock value over 2021. However, it’s refreshing to see somewhat of a happy ending; shares of StoneCo soared nearly 40% in Friday’s early trading after the company posted an uplifting Q4 earnings report late on Thursday. 

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It turns out that the depressed stock price was far from reflective of company success. Revenue for Q4 increased 87% to $369.3M, beating the Wall Street consensus of $339M. The company came in line with EPS, hitting expectations of $0.03. It was management’s outlook that really won the hearts of the bulls last night, claiming an expected revenue growth of between 113% and 119% year-over-year during Q122, ranging between $366M- $376M; topping analyst projections of $344.5M.

The coming fiscal year looks bright for StoneCo. Not only has the company battled through an unprecedented time for fintech, but they are also working hard on improving margins after already repricing software offerings and increasing efficiency in expense management. Following the earnings release, Citigroup analyst Gabriel Gusan upgraded the company to Buy from Neutral, citing an attractive valuation and emerging positive trends that indicate strong short-term results. 

StoneCo has some way to go to make up for ground lost over the pandemic, but finding a reason to not back the low-priced fintech is rather difficult. 

 

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