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StoneCo brought in about 3.59 billion Brazilian reais in revenue this quarter, which was much higher than the 0.71 billion analysts were looking for. Profit per share also came in well ahead of expectations at 2.40 reais. The company is successfully moving beyond just selling card readers to becoming a full financial partner for small businesses, offering them banking accounts and retail software.
This shift is important because it makes it harder for customers to leave for a cheaper rival. While profit margins are slightly lower than they were a year ago, they improved compared to the first quarter of this year. If the company can keep growing its revenue while keeping its costs under control, it remains on a path toward much higher long-term value than the current stock price suggests.
The company reports its latest numbers today. Beyond the basic profit and sales figures, the most important thing to watch is the performance of the credit business. StoneCo is working to grow its loan book after a difficult period of losses a few years ago, so the health of those new loans is a key sign of whether the business is truly on a more stable path. We will also be looking at how many customers are using both the payment services and the company's retail software. This combination is what makes it harder for merchants to switch to a rival, and keeping that tie-up strong is essential for maintaining steady profit margins in a competitive Brazilian market.
The company is expected to report revenue of about 710 million dollars and earnings of 46 cents per share. This update will be an important check on whether the business is successfully growing its loan book while keeping credit losses under control.
We will also be looking for signs that more merchants are using both StoneCo's payment services and its retail software. This combination is what makes the business harder for rivals to compete with, as it is much more difficult for a store to switch providers when their entire management system is tied to the platform.
The firm set its target at 12.60 dollars, which is lower than the average analyst target of 14 dollars. While this is a conservative view, it still suggests some room for the stock to rise from its current price of about 11 dollars.
Source: Jefferies
The firm lowered its target to 15 dollars, though it still recommends buying the stock. Even with the lower target, the firm expects the stock to rise significantly from its current price of about 11 dollars.
Source: UBS
The company has a perfect record of beating analyst profit targets over the last two years. This suggests management is conservative with its forecasts and consistently over-delivers.
| Expectation | |
|---|---|
| EPS | $0.50 |
| Revenue | $728M |