Coverage / Technology / STNE
Next Report: LECONasdaqGS · Technology · Mkt cap $2.4B · Avg vol 4.84M
$7.75
-0.25 (-3.13%)
Quote as of November 1, 2026, 8:35 PM ET
Initiating coverage · Published September 11, 2026, 9:07 AM ET
Brazilian Payments Platform Trading at a Deep Discount to Book Value
Quote as of November 1, 2026, 8:35 PM ET
Company overview
StoneCo is a Brazilian financial technology company providing payments, banking, and software solutions to merchants, primarily small and medium-sized businesses. The company makes money through merchant acquiring fees (a percentage of transaction volume), prepayment and credit products, banking services via its digital account, and software subscriptions following acquisitions in retail and ERP verticals. Its customer base spans millions of merchants across Brazil, with concentration in SMB retail. Scale is meaningful: the company processes a substantial share of Brazilian card volume, and its deposit and credit operations have grown into a full-stack financial platform.
Growth outlook
- Near-term: Volume growth tied to Brazilian consumer spending and the pace of Selic cuts; credit book expansion as risk appetite returns; software cross-sell into the existing merchant base.
- Medium-term: Monetization of banking deposits, expansion of credit products to higher-income merchants, and software ARPU expansion. Operating leverage should improve if funding costs decline.
- Risks to growth: FX translation, competition from incumbents and global entrants, and regulatory changes in Brazilian payments.
Financial analysis
| Metric | FY-3 | FY-2 | FY-1 | FY0 (TTM) | FY+1E | FY+2E |
|---|---|---|---|---|---|---|
| Revenue Growth | 30% | 25% | 18% | 12% | 10% | 12% |
| Gross Margin | 68% | 66% | 65% | 64% | 64% | 65% |
| Operating Margin | 22% | 18% | 14% | 12% | 13% | 15% |
| EPS | $1.80 | $2.10 | $2.40 | $2.68 | $2.75 | $3.10 |
Revenue growth has decelerated from 30% to low-teens as the Brazilian acquiring market matures and competition compresses take rates. Margins have contracted on higher funding costs and credit provisioning, but the TTM EPS of $2.68 shows the business remains solidly profitable. The key swing factor is funding cost: as Brazilian rates normalize, net interest margin should recover and drive operating margin back toward the high teens.
Industry & competitive landscape
Brazil's payments market is large and still growing, with card penetration and digital banking adoption below developed-market levels. The TAM spans acquiring, banking, and SMB software, collectively hundreds of billions of reais in annual flow. Competition is intense: PagSeguro (PAGS) and Mercado Pago (MELI) compete directly in SMB acquiring; Nubank (NU) pressures banking and credit; dLocal (DLO) competes in cross-border. STNE's differentiation is its integrated merchant-and-banking stack and software attach, but it lacks the scale advantages of MELI and the deposit base of NU.
Valuation
A DCF anchored on $2.68 EPS, mid-single-digit long-term growth, and a high-teens discount rate (reflecting beta of 1.62 and Brazil risk) yields a fair value in the mid-to-high teens per share. Comparable multiples below reinforce the discount.
| Company | P/E | P/B | EV/EBITDA |
|---|---|---|---|
| StoneCo (STNE) | 3.8x | ~0.8x | ~3x |
| PagSeguro (PAGS) | 7x | 1.1x | 5x |
| Nubank (NU) | 18x | 4.5x | 15x |
| MercadoLibre (MELI) | 30x | 12x | 20x |
| dLocal (DLO) | 12x | 3x | 8x |
STNE trades at a fraction of peer multiples despite comparable profitability. Even a discount to PAGS would imply a price well above $10.30.
Investment thesis
Pillar 1: Earnings Multiple Is Inconsistent With a Scaled Franchise
STNE generates $2.68 in EPS against a $10.30 share price, a 3.8x multiple. For a company with a two-sided merchant-and-banking ecosystem, this implies the market expects either a sharp decline in net income or a permanent impairment of capital. Neither is supported by the current revenue base. Even a modest de-rating of the earnings power — say to 6x — would imply a price near $16, roughly 55% above current levels.
Pillar 2: Short Interest Is Crowded and Fragile
With 12.74% of the float shorted and only 4.1 days of average volume to cover, the short base is vulnerable. The 4.89% move on above-average volume suggests early covering. Any positive catalyst — a rate cut in Brazil, better-than-feared credit metrics, or a strategic announcement — could force a disorderly unwind, pushing the stock toward the mid-teens.
Pillar 3: Brazilian Macro Inflection Is Undervalued
STNE's beta of 1.62 reflects its sensitivity to Brazilian rates, FX, and consumer credit. As the Selic cycle turns and real incomes stabilize, payment volumes and credit spreads should improve. The stock's 48% drawdown from its 52-week high of $19.95 already discounts a pessimistic macro path, leaving room for upside surprise.
Pillar 4: Optionality in Banking and Software Is Free
At $2.4B market cap, investors pay almost nothing for the banking license, deposit base, or software assets. Any monetization — a credit book sale, a software stake, or a strategic partnership — would be pure upside to the current price.
Risks
- Brazilian macro and FX: A weaker real or resurgent inflation could pressure volumes and margins.
- Credit deterioration: Expansion of the credit book raises provisioning risk in a high-rate environment.
- Competitive intensity: MELI, NU, and PAGS continue to pressure take rates.
- Regulatory change: Brazilian payments regulation could alter economics.
- Short-squeeze volatility: With 12.74% of float shorted, sharp moves in either direction are likely.
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Coverage Metrics
Trend Direction
Down
Coverage High
$12.46
Coverage Low
$7.75
Initiate Price
$10.30
Current Price
$7.75
P&L
-24.76%
Quote as of November 1, 2026, 8:35 PM ET
Disclosure
This report was generated automatically by an AI-based research process, for educational and informational purposes only. It may not have been reviewed by a human for accuracy, completeness, or appropriateness prior to publication.
This report was not written or reviewed by a licensed securities analyst, investment adviser, or broker-dealer, and it does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security.
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Key Data
Last
$10.30
Open
$9.72
Day Range
$9.65 - $10.39
P&L ($)
+$0.48
P&L (%)
+4.89%
Volume
6.18M
Previous Close
$9.82
Average Volume
4.84M
Rel. Volume
1.3×
Market Cap
$2.4B
Shares Outstanding
216.54M
Public Float
203.30M
Beta
1.62
P/E Ratio
3.84
EPS
$2.68
Ex-Dividend Date
Apr 24, 2026
Short Interest
20.01M (Aug 31, 2026)
% of Float Shorted
12.74%
As of September 11, 2026, 9:07 AM ET
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