Last Update 09 Dec 25

Fair value Decreased 1.22%

STNE: Future Buybacks Will Signal Confidence And Support Earnings Upside

Analysts have slightly trimmed their price target on StoneCo to approximately $20.29 from about $20.54, citing a modestly higher required discount rate that more than offsets small upgrades to long term revenue growth, profitability, and valuation multiples.

Analyst Commentary

Bullish analysts remain constructive on StoneCo, highlighting that, even with a slightly higher discount rate, the stock screens as attractively valued relative to its long term growth and margin expansion prospects. They point to a robust pipeline of new merchants, strengthening cross sell dynamics, and improving unit economics as key supports for the current premium to local payment peers.

At the same time, more cautious voices emphasize that the higher required return reflects persistent macro and competitive risks in Brazil, which could slow the pace at which StoneCo narrows the gap to global fintech valuation multiples. As a result, the consensus stance tilts positive but with a clearer focus on execution discipline and capital allocation.

Bullish Takeaways

Bullish analysts see the modest increase in the discount rate as more than offset by improving top line momentum, supported by rising client additions and higher payment volumes.
They argue that operating leverage from scale and continued cost discipline should drive steady margin expansion, underpinning upside to earnings estimates over the medium term.
Many highlight StoneCo's diversified revenue streams and growing software and financial services offerings as justifying a higher long term valuation multiple than traditional acquirers.
The trimmed but still robust price target is viewed as signaling confidence that StoneCo can compound earnings at a healthy double digit rate despite near term volatility.

Bearish Takeaways

Bearish analysts focus on the higher required discount rate as evidence that risk around Brazil's macro environment and regulatory backdrop remains elevated.
They caution that intensifying competition in merchant acquiring and financial services could pressure take rates and slow the pace of margin expansion assumed in current forecasts.
Some remain wary that StoneCo may need to invest more heavily in customer incentives and technology to defend share, which could weigh on free cash flow and constrain multiple expansion.
There is also concern that recent strength in the share price already discounts a sizable portion of the long term growth story, limiting near term upside relative to the revised target.

What's in the News

Completed share repurchase of 7,767,202 shares, equivalent to 2.89% of share capital, for a total of BRL 652.56 million under the buyback program announced on May 8, 2025 (company filing)
Between July 1, 2025 and September 30, 2025, repurchased 5,378,082 shares, or 2.01% of share capital, for BRL 465.23 million as part of the same buyback authorization (company filing)
The ongoing execution of the buyback program indicates management confidence in StoneCo's long term earnings trajectory and balance sheet strength (company filing)

Valuation Changes

The Fair Value Estimate has declined slightly to $20.29 from $20.54, reflecting a modestly more conservative valuation framework.
The Discount Rate has risen significantly to 8.91% from 7.51%, indicating a higher required return to compensate for perceived risk.
The Revenue Growth Assumption has increased marginally to 7.61% from 7.57%, suggesting a slightly stronger outlook for top line expansion.
The Net Profit Margin Assumption has edged up to 24.07% from 24.02%, implying a small expected improvement in profitability.
The Future P/E Multiple has increased modestly to 7.03x from 6.82x, incorporating a slightly higher valuation relative to forward earnings.

Divestment of non-core assets and redeployment into higher-margin financial services are strengthening profitability and supporting capital returns like share buybacks.
Technology-driven efficiency and cross-selling of integrated financial solutions are driving client growth, deeper engagement, and sustained profit expansion.
Reduced diversification, slower payment growth, higher loan risk, and mounting competition pose challenges to sustaining profitability and future revenue opportunities.

Catalysts

About StoneCo

Provides financial technology and software solutions to merchants and integrated partners to conduct electronic commerce across in-store, online, and mobile channels in Brazil.What are the underlying business or industry changes driving this perspective?

The accelerating shift from cash to digital payments and financial inclusion among Brazil's small and micro businesses is expanding StoneCo's core addressable market; with current market share still low, this supports long-duration double-digit client and revenue growth.
Focused divestment of capital-intensive software assets has freed up substantial capital (about 25% of market capitalization), enabling StoneCo to redeploy resources to higher-growth, higher-margin financial services and to return excess capital via share buybacks-positively impacting EPS and net margins.
Cross-selling of end-to-end financial solutions (payments, digital banking, working capital credit) is increasing client engagement and wallet share, demonstrated by growing deposit balances (+36% year-over-year) and credit portfolio expansion (+25% sequentially), supporting higher recurring revenue and long-term net earnings improvement.
Operational efficiency gains, driven by continued investment in proprietary technology and strategic use of low-cost deposits to fund operations, are structurally reducing funding and operating costs, underpinning steady gross profit and ROE expansion.
Rising adoption and transaction volumes in instant payment platforms like PIX, and StoneCo's ability to bundle value-added services (credit, banking, analytics) while maintaining pricing discipline, are allowing the firm to outpace TPV (total payment volume) growth with superior gross profit and net income growth.

StoneCo Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming StoneCo's revenue will grow by 8.2% annually over the next 3 years.
Analysts assume that profit margins will increase from -9.2% today to 28.5% in 3 years time.
Analysts expect earnings to reach R$5.0 billion (and earnings per share of R$10.74) by about September 2028, up from R$-1.3 billion today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 5.2x on those 2028 earnings, up from -18.9x today. This future PE is lower than the current PE for the US Diversified Financial industry at 16.4x.
Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.77%, as per the Simply Wall St company report.

StoneCo Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The divestiture of core software assets (such as Linx and SimplesVet) reduces StoneCo's diversification and potential long-term avenues for integrated value-added services, making the company more reliant on payment and financial services for growth; this could limit future revenue sources and margin expansion opportunities.
TPV (Total Payment Volume) growth has decelerated to low double digits, with management attributing this partly to client repricing and a weaker macroeconomic backdrop-soft market growth among MSMBs and micro-merchants, especially if persistent, could constrain revenue growth and operating leverage.
Significant growth in the credit portfolio necessitated a sharp increase in provisions for expected credit losses, reflecting exposure to higher risk loans and macro caution-sustained or further increases in provisions would weigh on net margins and bottom-line earnings.
The company's strong results in EPS and ROE are partly driven by short-term factors such as repricing, lower tax rates, and buybacks; if these drivers moderate (e.g., tax normalization, slower buyback pace, reduced pricing power as competition intensifies), EPS and net income growth could slow.
Competitive dynamics remain rational for now, but the threat of banks and fintechs (among them, initiatives such as free PIX payments and deposit offers from major banks) could increase margin pressures and drive up customer acquisition and retention costs, directly impacting profitability and long-term revenue expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $16.942 for StoneCo based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $19.97, and the most bearish reporting a price target of just $14.37.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be R$17.4 billion, earnings will come to R$5.0 billion, and it would be trading on a PE ratio of 5.2x, assuming you use a discount rate of 8.8%.
Given the current share price of $16.38, the analyst price target of $16.94 is 3.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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