Please ensure Javascript is enabled for purposes of website accessibility

Why StoneCo Stock Fell 45.4% in March

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.