What happened

It was a volatile day for shares of Brazilian payments company StoneCo (NASDAQ:STNE). After starting the day 6% higher, the stock temporarily plummeted into negative territory. As of 2 p.m. EDT on Tuesday, it was only up 1%.

Investors are understandably conflicted. Encouraging economic data is countered by fears of a second coronavirus wave. Not to mention, StoneCo's promising addressable market just gained a new competitor with very deep pockets.

A figurine of a bull stands next to one of a bear.

Image source: Getty Images.

So what

The U.S. Census Bureau just released retail data for May, showing a 17.7% percent month-over-month increase in spending. StoneCo operates in Brazil, so it's not a direct beneficiary of such data. But results in the U.S. demonstrate how quickly an economy can recover from the coronavirus. When business reopens, Brazil might enjoy a similar recovery timetable. 

Brazil is still very early in its digital payments transformation, as is much of Latin America. Companies like MercadoLibre and PagSeguro Digital are riding the trend. But there's a new contender in town: Facebook. In a press release Monday, the company announced it's launching payment services on WhatsApp in Brazil. 

It'll take time to understand WhatsApp's potential in Brazil with payments. Many businesses already use the messaging app to communicate with customers, making the service a logical integration. It's likely WhatsApp will fill a role, but there can be multiple winners in the war on cash in Brazil. And if there's not a second wave of the virus, companies like StoneCo can get back to winning very soon.

Unfortunately, that's a big if. According to Bloomberg, Beijing just closed all schools; it appears COVID-19 is breaking out in China once again, and the country is trying to contain the situation. Since China is further along on this journey, it could be a sign of things to come, both in the U.S. and Brazil.

Now what

StoneCo stock's up-and-down day from this emotionally conflicting information is a good reminder just how little we know in the short term. In reality, no one truly knows whether the coronavirus will allow completely unrestricted economic activity in 2020 or not. And no one knows what impact WhatsApp could have on StoneCo's business. Therefore, predicting where its stock price will be in the weeks and months ahead is futile. 

That's why we advocate for a long-term view when investing in stocks. For StoneCo, I see an enormous market opportunity as Brazil's economy becomes more digital. I believe this trend will continue playing out for years to come. The question is whether StoneCo is one of the better-positioned companies to profit from the opportunity.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.