An overseas investment idea that investors shouldn’t overlook is Stone, a Cayman Islands-based Brazilian financial technology and software solutions company that JPMorgan is bullish on. Analyst Yuri Fernandez upgraded Stone’s U.S.-listed shares to overweight from neutral, citing the stock’s attractive earnings potential at a compound annual growth rate (CAGR) of 20% between 2023 and 2027, as well as a cheap valuation. He maintained his year-end price target of $20, which would represent an upside of about 50% from the most recent closing price. The stock has fallen about 25% this year, with most of those declines occurring since Stone announced weaker-than-expected first-quarter earnings results on March 13, Fernandez said. The stock has nearly doubled in 2023, up 91%. “We have been watching the payments sector on the sidelines for some time. It is not an easy sector to navigate given the intensity of competition, but the current multiples of our growing banking franchises keep us positive,” Fernandez said in a note released Thursday. “We are [a] Stone’s rerating depends heavily on bank supply (i.e. deposits and healthy credit growth). [the] In November 2023, Stone CEO Pedro Zinner told Reuters that the company planned to increase net income eightfold by the end of 2027 by accelerating the integration of its financial services and software businesses and leveraging cash to improve profitability. The company forecast adjusted net income to be at least BRL 1.9 billion in 2024 and at least BRL 4.3 billion in 2027, up from BRL 526 million in 2022, the report said. Fernandez said Stone’s differentiated business model, based on a close approach to customers through hyper-local distribution centers, has allowed it to rapidly expand its market share. He estimated that Stone has about 20% market share in its core micro, small and medium-sized businesses (MSMBs) market. Meanwhile, Stone’s “best-in-class service” and low prices have led to above-average customer satisfaction, and the company’s new lending business could further boost earnings, the analyst wrote. “Industry irrationality remains a risk, but current valuations are attractive given EPS growth potential and bank upside,” Fernandez said, noting downside risks include intense local competition and the possibility that the founders may sell more shares. STNE mountain 2022-12-31 StoneCo. shares will be sold in 2023 and 2024.
JPMorgan upgrades this battered payments stock, saying it could rise 50%
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