Stone (STOC31): profit and revenue exceed projections and company reduces share in Inter (BIDI11); stock rises on Nasdaq

Payments company StoneCo (Nasdaq: STNE; B3:STOC31) reported last Thursday (2) that it had a net loss of BRL 313 million in the first quarter of 2022, reversing a positive result of BRL 158 million recorded a year earlier. .

In adjusted terms, the Brazilian company listed on Nasdaq had a profit of BRL 132.2 million in the period, down 29.4% year-on-year.

The result was well evaluated by the market and the company’s shares traded on the American Stock Exchange advanced 14.68% at 8:18 am (Brasília time) to US$ 11.95 on the pre-market, after having jumped 7.20% the day before. . In regular trading, the papers slowed down the gains, but still on a strong rise: at 10:32 am, the high was 6.62%, at US$ 11.11.

StoneCo also informed in the report that it sold 21.5% of its stake in Banco Inter (BIDI11), taking advantage of the option offered in the restructuring of the group. The company had until then 4.97% of Inter’s capital and now has 3.9%.

The company announced that its first quarter revenue totaled R$ 2.07 billion, an increase of 138.6% compared to the same period last year. StoneCo’s forecast for the period was an increase of 119%.

The figures come amid heightened market attention to the company, which faced heavy credit losses last year and had to make price adjustments to try to improve its margins. By releasing the results of the fourth quarter of 2021, the company managed to assuage investor concerns by presenting encouraging revenue expectations.

The company also predicted on Thursday that its second-quarter revenue will be BRL 2.15 billion to BRL 2.2 billion, an increase of 154.1% over a year earlier.

Recovering profitability, revenue on the rise

For Itaú BBA, the company is recovering its profitability. It reported better-than-expected results for the bank, with revenues driven by a higher acceptance rate, which more than offset the increase in operating expenses.

“Adjusted net income of R$132 million exceeded our expectation of R$108 million – a significant improvement over 4Q21, in addition to an even better guidance for 2Q22”, he points out.

While mid-term challenges remain and the valuation is not a bargain at 21 times the expected 2023 P/E ratio, analysts highlighted expecting a positive stock price reaction in the short term as that repricing is being maintained – an important reading for PagSeguro (PAGS34) and Cielo (CIEL3). THE rival PagSeguro releases its quarterly numbers next Wednesday.

Itaú BBA maintained its market perform recommendation (performance in line with the market average, equivalent to neutral) for STNE paper, with a target price of US$ 11, or an upside potential of 5.6% in relation to the closing of the Eve.

Credit Suisse also has an equivalent-neutral recommendation for the asset, but with a higher price target of $22, or upside potential of 111% compared to yesterday’s close. The bank also pointed out that the company had positive results, with Stone’s R$2.07 billion revenue exceeding guidance by 9% and accelerating to an 87% year-on-year increase (proforma for Linx), from 51% in the fourth quarter. quarter of 2021, due to strong total payment volume (TPV) and a much higher acceptance rate.

Adjusted earnings before interest and taxes (Ebit) were 16% above guidance and much better than 4Q21, while pointing out that profitability should continue to improve.

Morgan Stanley points out that the result was driven by strong TPV growth and successful repricing efforts.

Despite higher churn and a seasonally weak quarter, Stone posted revenue 10% above consensus.

Guidance on pre-tax earnings and earnings for 2Q22 is above consensus and implies further pre-tax profit margin expansion.

In addition, analysts rated management’s comments during the conference call regarding the repricing, growth and profitability outlook for 2022 as constructive. The bank reiterates an overweight assessment (exposure above the market average) for Stone and a target price of US$ 28, or up potential of 169% from the previous day’s close.

In the contraction, Bradesco BBI pointed out to see the results as neutral for the shares, as they were very much in line with the company’s guidance provided in 4Q21. In addition, the guidance for 2Q22 was in line with the bank’s expectations; thus, it does not believe that it should bring upward revisions of results at this time.

In short, analysts point out, although the shares have dropped 38% year-to-date, BBI maintains a more cautious view of Stone, as it sees that the company is trading at an expensive price around 42 times the P/E expected for 2022, with potential downside risks related to lower prepayment volumes and higher churn rates in the coming quarters. BBI maintains an underperform rating (a performance estimate below the market average) for Stone and a target price of US$ 10, 4% lower compared to the previous day’s closing.

(with Reuters)

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