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Why StoneCo Stock Fell 45.4% in March

By Keith Noonan – Apr 8, 2020 at 3:59PM

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The payment-processing stock sank like a rock last month, but its share price is bouncing back in April.

What happened

Shares of StoneCo (STNE 5.07%) slipped 45.4% in March, according to data from S&P Global Market Intelligence. The payment-processing company reported fourth-quarter results early in the month that were better than expected, but uncertainty stemming from the novel-coronavirus pandemic prompted a steep share price decline.

^SPX Chart

^SPX data by YCharts.

Stone published fourth-quarter earnings on March 2, with non-GAAP (adjusted) earnings per share of $0.17 that were in line with analyst expectations and revenue of $174.78 million that topped the average analyst estimate by $6.94 million. The stock gained ground shortly after the earnings release, but the market's abrupt turn into bearish territory dragged the Brazil-based payment processor's valuation to a new 52-week low. 

The corner of a credit card, showing the last few digits of the account number

Image source: Getty Images.

So what

StoneCo stock had its initial public offering in October 2018, and its share price hit a lifetime high early in February of this year. The business's long-term outlook still holds plenty of promise, as it's likely that people in Brazil will increasingly use credit-and-debit cards and mobile payment services instead of cash, but investors dumped the stock last month as the novel-coronavirus pandemic threatened the economic climate in Brazil and around the globe.

Now what

StoneCo has regained some ground in April's trading. The company's share price is up roughly 16% in the month so far.

^SPX Chart

^SPX data by YCharts.

Payment-processing services have a long runway for growth in Brazil and other Latin American and South American territories. However, StoneCo's growth-dependent valuation means investors should approach the stock with the understanding that its share price is primed for volatile swings if business performance fails to meet expectations or unexpected challenges arise.

StoneCo is valued at roughly 34 times this year's expected earnings and 11 times expected sales. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of Stoneco LTD. The Motley Fool has a disclosure policy.

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Stocks Mentioned

StoneCo Ltd. Stock Quote
StoneCo Ltd.
STNE
$9.53 (5.07%) $0.46

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