Shares of Brazilian payments company StoneCo (NASDAQ:STNE) traded higher on Tuesday, and there wasn't any clear reason why. There weren't any press releases or prominent analyst calls. Nevertheless, the stock was up 4.7% for the day.
If anything, investors should have been more apprehensive than anything with StoneCo stock. That's because Brazil just passed the grim milestone of 50,000 deaths from the COVID-19 pandemic.
Brazil is the fifth largest country in the world by area, and the sixth largest by population, with over 200 million people. There have been over 1.1 million confirmed coronavirus cases in the country, and now total deaths have surpassed 50,000, second only to the U.S.
The coronavirus makes it hard for StoneCo's primary customers, small and medium-size businesses, to operate. Business was humming pre-coronavirus: StoneCo's total payment volume (TPV) was up 48%, 52%, and 63% year over year in January, February, and the first half of March, respectively. But TPV fell hard once lockdowns began -- down 4% in second half of March, only up 9% in April, and 23% in May.
StoneCo's business will be challenged until normal social and economic activity can return in Brazil. Perhaps investors are hoping the country gets a better grip on the situation, after a judge ordered the country's president, Jair Bolsonaro, to wear a face mask in public or face a fine. Many believe the president hasn't taken the virus seriously. Maybe this is a sign the other branches of government are interested in strengthening their collective response.
For better or worse, it's not always clear what's driving a stock's movement. In reality, it probably happens more than we're comfortable admitting and it underscores why we aren't too wrapped up in a short move higher or lower. For a stock to be a great buy, StoneCo included, we're looking at trends creating business opportunities, competitive advantages, and management teams capable of turning healthy profits. Those factors play out over years, not days.