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Here's Why StoneCo Stock Is Plunging Today

By Matthew Frankel, CFP® – Apr 18, 2019 at 11:44AM

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One of StoneCo's rivals just announced a big competitive threat.

What happened

Shares of Brazilian fintech company StoneCo (STNE 0.55%), which gained notoriety in recent months after being added to Berkshire Hathaway's portfolio, are plummeting today. As of 10:45 a.m. EDT, the stock was down nearly 25%.

So what

Generally speaking, moves like this are often seen after earnings announcements, but StoneCo isn't set to report earnings again for another couple months.

Credit card being inserted into a payment terminal.

Image source: Getty Images.

In this case, the plunge appears to be triggered by a move from a rival company. Itau Unibanco Holding SA (ITUB 0.89%), a large Brazilian bank, said that it will begin to advance credit card payments to small and medium-sized merchants.

Itau's card-processing unit, Rede, will pay merchants in just two days, much faster than the 30-day industry standard. This could certainly put pressure on other payment processors in the Brazilian market, including StoneCo.

Now what

It's not uncommon for larger, established companies like Itau to try to increase competitive pressure on fast-growing, disruptive rivals (Itau is more than five times StoneCo's size by market cap). And it's worth pointing out that StoneCo has soared recently -- after today's drop, it's still up by more than 45% year to date, so it's not surprising that potentially negative news is producing a big pullback.

Even so, if StoneCo can figure out a way to compete with Itau's latest move, today's decline could be a good buying opportunity. If not, StoneCo's growth could certainly slow down.

Matthew Frankel, CFP owns shares of BRK-B. The Motley Fool owns shares of and recommends BRK-B. The Motley Fool has a disclosure policy.

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