Are StoneCo’s (STNE) Expanding Credit Ambitions Creating New Growth or Unseen Risks?

• Recently, analysts expressed renewed optimism about StoneCo, citing robust financial results, double-digit year-over-year growth in core Payments, and rapid expansion in Banking and Credit operations, alongside increased EPS guidance and share buybacks.
• An important insight is the company's rapidly growing credit portfolio which, while contributing to higher yields, also increases risk as indicated by rising non-performing loans.
• We’ll examine how expanding credit operations and their associated risks may affect StoneCo’s overall investment outlook.

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StoneCo Investment Narrative Recap

To own shares of StoneCo, you need to believe in its ability to leverage Brazil’s shift to digital payments and expand in banking and credit, all while managing the risks brought by competition, margin pressure, and a growing loan book. The latest news of double-digit gains in core Payments, explosive Banking and Credit growth, and raised EPS guidance has supported the current investment catalysts, but also puts a brighter spotlight on the increasing risks from non-performing loans, particularly in the short term, this is the area to watch.

The most relevant recent announcement is StoneCo’s aggressive share buyback activity, repurchasing nearly 7.8 million shares for R$652.56 million since May. This move aligns with strengthened capital returns and may represent confidence in future earnings power, underpinning the company’s EPS growth catalyst even as market volatility and lending risk intensify.

Yet, despite positive trends, growing credit exposure means investors should not overlook…

Read the full narrative on StoneCo (it's free!)

StoneCo's narrative projects R$17.4 billion revenue and R$5.0 billion earnings by 2028. This requires 8.2% yearly revenue growth and a R$6.3 billion earnings increase from R$-1.3 billion currently.

Uncover how StoneCo's forecasts yield a $20.57 fair value, a 37% upside to its current price.

Exploring Other Perspectives

Nine members of the Simply Wall St Community gave fair value estimates for StoneCo ranging from R$14.33 to R$45.96 per share. Many see future upside if rapid credit expansion can fuel sustainable earnings without a spike in loan losses.

Explore 9 other fair value estimates on StoneCo - why the stock might be worth just $14.33!

Build Your Own StoneCo Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your StoneCo research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
• Our free StoneCo research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate StoneCo's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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