Technology Sector Ideas

[gfp927z]

>>> StoneCo stock has explosive potential -


https://www.fool.com/investing/2023/04/11/2-stocks-down-more-than-75-to-buy-right-now/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Keith Noonan: StoneCo (STNE 3.09%) is a Brazil-based payment processing and lending company that's seen volatile trading over the last few years. To be more descriptive, it's a fintech services provider with thriving payment solutions for small and medium-sized businesses and a credit business that was crushed by headwinds related to the coronavirus pandemic and flaws in Brazil's national registry system, which was used for loan underwriting.

Even after discharging or selling off much of its credit portfolio at basement-level prices, StoneCo still carries roughly $79 million in bad debt on its books. Due to macroeconomic pressures and the collapse of the credit business, the company's share price is down approximately 91% from its high. But there's an opportunity here.

StoneCo's fourth-quarter earnings report arrived with strong performance for the core payments business and signs the company is emerging from challenges created by its credit business. Sales and earnings performance for the period beat both internal guidance and the average analyst estimates, with revenue growing 44% year over year and non-GAAP (adjusted) net income swinging into positive territory at $46.4 million from a loss of $6.4 million in the prior-year period.

While StoneCo shouldn't be thought of as a low-risk stock, the market appears to be too pessimistic about the company, and it trades at multiples that leave room for explosive upside.

Valued at less than 15 times expected earnings for this year and less than 1.3 times expected sales, the Brazilian fintech services provider offers an attractive risk-reward proposition at current prices. If macroeconomic pressures ease and the company maintains solid footing in its corner of Brazil's payment-processing space, the stock stands a very good chance of delivering strong returns.

<<<



---