Scotiabank Sees Sharp Upside In StoneCo

  • Analysts have different takes on StoneCo Ltd STNE, a financial technology solutions provider.
  • Scotiabank analyst Jason Mollin initiated coverage with a Sector Perform rating and a $22 price target, implying a 30% upside.
  • Mollin rolled out coverage on a trio of Brazilian payments and fintech players, which he noted together represent about 50% of the Brazilian acquiring market's total payment volume or TPV. 
  • He sees Stone starting to recover from lending issues and benefiting from Linx integration next year.
  • His "conservative" full-year 2021 earnings estimate is more than 50% below consensus to incorporate a loss from issues managing credit collateral and stopping loan originations in Q3, as well as cost pressure from investments and higher funding costs.
  • Grupo Santander analyst Henrique Navarro downgraded to Underweight from Hold with a price target of $17, down from $45, citing his cautious view on the acquiring sector. 
  • He sees no visibility on Stone's ability to extract value beyond acquiring and also points to economic trends affecting the acquiring industry that are "disappointing."
  • While acquirers' total payments volume may be "a way to play inflation," if there is a recession, "inflation alone can do nothing."
  • Price Action: STNE shares traded higher by 8.33% at $16.9 on the last check Wednesday.
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