STNE

StoneCo Ltd - Ordinary Shares - Class A

TMT, Finance/Real Estate


Presented:01/29/2020
Price:$43.44
Cap:$12.05B
Current Price:$10.96
Cap:$3.36B

Presented

Date01/29/2020
Price$43.44
Market Cap$12.05B
Ent Value$10.34B
P/E Ratio69.82x
Book Value$4.88
Div Yield0%
Shares O/S277.37M
Ave Daily Vol1,930,632
Short Int13.87%

Current

Price$10.96
Market Cap$3.36B
StoneCo Ltd. engages in the provision of financial technology solutions. It caters to merchants and partners that conduct electronic commerce across in-store, online, and mobile channels. It offers cloud-based technology platform, electronic payments, and automation of business processes at the point-of-sale. The company was founded on March 11, 2014 and is headquartered in São Paulo, Brazil.

Publicly traded companies mentioned herein: Banco Santander Brasil SA (SANB11 BZ), Cielo SA (CIEL3 BZ), Itau Unibanco Holding SA (ITUB), Mastercard Inc (MA), MercadoLibre Inc (MELI), Pagseguro Digital Ltd (PAGS), StoneCo Ltd (STNE), Visa Inc (V)

Highlights

The presenter is short shares of StoneCo Ltd (STNE), a Brazilian merchant acquirer that he considers misunderstood by investors. Despite secular headwinds, troubling market share trends, and a significant upcoming customer loss, market sentiment is stronger than any other point since its October 2018 IPO. Shares are priced at ~$44, ~60x consensus 2019 EPS estimates (FYE December 31, 2019 but will report in March) and ~45x 2020 consensus EPS estimates. This implies material earnings growth, which the presenter is bearish on given a number of factors. From a relative valuation perspective, he also finds it irrational that STNE’s market share is ⅙ that of its biggest competitor, CIEL3, yet its market cap is 3x larger. In his opinion, the negative trends are now starting to roll through and STNE’s earnings results that will be released in March could be a catalyst that drives the stock down.

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Idea Discussion

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