StoneCo (STNE) Stock Explodes 30% Following Earnings, Citi Upgrades to Buy

Shares of StoneCo (NASDAQ: STNE) are up nearly 30% in premarket trading Friday after the company published Q4 results and guidance for the current first quarter.

The company reported an adjusted net income of BRL33.7 million, well below the consensus estimates of BRL65.2 million.

StoneCo reported 1.8 million active clients for the period. Payment volume was reported at BRL89 billion, while revenue and other income totaled BRL1.87 billion. Cash and cash equivalents totaled BRL4.5 billion, up 84% YoY.

For the current first quarter, StoneCo expects total revenue and income to be in the range of BRL1,850 million to BRL1,9000 million, translating to +113% to +119% YoY growth. Adjusted pretax income is estimated to be higher than BRL140 million in FQ122, compared with BRL17.2 million in FQ421.

“We are reorganizing the company into two operating segments: financial services and software, which we'll begin to report in 2022. The financial services segment is the Stone payments digital banking and credit business. The software segment will bring together Linx and all our other portfolio companies. We think this will provide greater transparency,” said Thiago Piau, CEO of StoneCo.

Citi analyst Gabriel Gusan upgraded shares to Buy from Neutral with a $15.00 per share price target, down from $18.00. The upgrade call comes after STNE stock fell 86% over the past year.

“At this point, we think valuation looks attractive, as we believe positive trends for the business such as take rate expansion and strong client additions indicate stronger short-term results than market expected, which was corroborated by the guidance for 1Q22 and positive message for 2022. Moreover, we believe there is still a valid opportunity in growing the offer of software and the reinstatement of the credit product, even if much smaller than estimated in the past,” Gusan said in a client note.

By Senad Karaahmetovic | [email protected]

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