JPMorgan analyst Yuri Fernandes upgraded StoneCo Ltd. (NASDAQ: STNE) from Neutral to Overweight with a price target of $20.00.

The analyst comments: "We have been on the sidelines on the payments sector for a while. It is not an easy sector due to competitive dynamics, but current multiples for growing banking franchises make us more positive. We are upgrading Stone to OW from Neutral on the back of appealing EPS potential (i.e., JPMe 20% 2023-27 CAGR) and discounted valuation of 9x 2025E P/E. When we adjust Stone for intangibles, we see the stock trading at 1.2x P/TBV 2025E for 25-30% ROTE. Shares are down 20% since results, which were polluted by several one-off items but overall were in line to our estimates. Basically shares are down to similar levels of its Investor Day (link). Moreover, while higher-for-longer Selic is not great for the sector, we see payment names as less dependent to rates than XP today, and we believe Stone re-rating depends mostly on banking deliveries (i.e., deposits and healthy credit growth) rather than macro environment. Moreover higher for longer should drive some industry rationality. We maintain our US$20 Dec 2024 price target, which implies ~50% upside potential from current levels."

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Shares of StoneCo Ltd. closed at $13.22 yesterday.