The total number of clients more than doubled to 267,900 by year’s end. Total payment volume jumped 74% to 26.6 billion reals.
While it serves merchants, StoneCo also sells its solutions to integrated partners such as payment service providers. It also has hubs near customers that include an integrated team of sales, service, and operations support staff.
Management said during the earnings call that they are encouraged by regulatory activity in industry and plan to upsell products to merchants. They also said there is huge headroom to go in merchant acquiring, as they have just a 6% share in market with just under 30% credit card penetration.
Management added that so far this year they are performing “according to plans.” They said the business is improving in all areas and that they are “very happy” with the results so far in 2019, and that this will be reflected in their margins.
However, investing in an IPO stock is never without risks. JPMorgan analyst Domingos Falavina, who was rating StoneCo stock as neutral with a 22 target, has warned it faces competitive threats from incumbents. He also said the firm has higher dependence on prepayment revenue compared to incumbents.
But there are upside opportunities for the stock too, such as customer stickiness due to software usage; and multiple convergence to peers such as Square (SQ) or PayPal (PYPL), which trade at significant premiums.
Another plus for the IPO stock is Brazil’s political and economic climates are improving. President Jair Bolsonaro, who won a runoff election on Oct. 28, took office in January with a pro-market agenda.
Last month, economy minister Paulo Guedes promised to end years of failed state interventions in Latin America’s largest economy.
I was thinking this IPO was too new to get into, but you guys have confirmed my feeling that I should get a starter position, even after post earnings jump. Oddly, Warren Buffet had an early position, which is not usually in our universe of higher growth stocks.