I’ve started a new thread on this…StoneCo is not that widely followed here, but I believe there are a few of us who invested because of GrowthMonkey bringing it to the board or possibly some had it themselves even before that. Regardless, it definitely satisfies the “growth stock” aspect for consideration here, the biggest drawback for a lot here I think is it’s not a US company, being Brazilian. It can basically be thought of as the SQUARE of Brazil.
So Dopp said: Be careful on STNE, its thesis has been broken. An incumbent Brazilian bank has made moves to make them far less promising as a company. https://www.fool.com/investing/2019/04/18/heres-why-stoneco-……
CloudAtlas already gave a good comment, and I agree, the thesis has not been broken, this is merely potential additional competition. The thesis was never that they don’t, or won’t, have any competition.
And the CEO addressed this issue here: https://investors.stone.co/news-releases/news-release-detail…
Yes, you need to be careful on this stock, but just like any of the other stocks we hold/discuss, but the thesis is still intact. We’ll find out even more on Mon, as that’s their next earnings release, but I continue to build my position in them especially on this most recent weakness, although I’ll be waiting till after the ER before adding any more.
Also the moves that were made by Itau did not go into effect until May 2nd, so we wouldn’t really see anything as far as pressure just yet on this earnings call.
I am very interested to see how this plays out because STNE seems to really think it is no big deal per the shareholder letter they sent out shortly after the announcement by Itau. I like StoneCo’s business model (customer centric and not engaging in price wars because they think they do not need to do this). Also, I very much like them moving into all of the other areas with their recent acquisitions growing their CAP/TAM (Banking, Software, Credit).
I was very late to SQ since I did not find this board until last year so this might be another opportunity.
- Reasons why I am in this stock:
- High Growth last 4 Qtr’s - 111%, 121%, 114%, Estimate 85% for this quarter
- High and accelearating GM the last 5 Qtr’s - 81% from 70%
- Expenses Under Control - OpEx under 50% of Revenue (about the same as SQ)
- Gross Profit is growing faster than Revenue the last 4 Qtr’s
- Total Payment Volume Growth accelerated the last 5 Qtr’s from 31% to 74% Growth
- EPS was up 950% from the previous year to $0.51 from -$0.06 (Brazilian numbers)
- Operating Margin increasing the last 6 Qtr’s from -6.6% to 36.8% most recently
- Adj Free Cash Flow was Postitive $144.7 up from Negative $-22.1 a year ago (Brazilian numbers)
- High NPS Score of 65 compared to the competition which is much lower closer to an avg of 4
- Customer Growth above 90% the last 4 Qtr’s
- Mgmt really seems to know what they are doing and are very confident in their business
- Founders are still there with high ownership (close to 50% last I checked)
- Berkshire Hathaway owns about 11%
- Currently STNE only about 6% market share
Things I don’t like are that it is outside the US (currency issues), revenue might be decelerating faster than I would like (if at all, don’t know yet and trying to look at on a yearly basis), harder to follow (thought it was great to see that letter from the CEO shortly after Itau made their announcement - definitely raised my opinion of the company and the mgmt).
I would appreciate anyone else’s thoughts, comments, risks or reasons for being in the stock.
I’ve done crisis communications for many years, albeit mostly for government agencies and seldom with for-profit corporations, and I was very impressed by that letter. It didn’t stink of PR speak, and also it came out quickly enough to tell me that the C-suite wasn’t deliberating with the IR team to get the messaging exactly right. It read to me like the goal was simply to educate and inform investors, not to convince them to ignore the news and double down.
Long STNE and MELI (~5% each) with an eye on PAGS