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Why StoneCo Stock Fell Today

By Evan Niu, CFA – Oct 30, 2020 at 2:26PM

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The Brazilian fintech specialist reported third-quarter earnings.

What happened

Shares of StoneCo (STNE -2.56%) have fallen today, down by 5% as of 1:20 p.m. EDT, after the company reported third-quarter earnings results. The results topped expectations and key metrics have rebounded to pre-COVID-19 levels.

So what

Revenue in the third quarter increased 39% to 934.3 million Brazilian reals ($162.7 million), which was ahead of the $135 million in sales that analysts were expecting. That resulted in adjusted net income of 287.9 reals ($50.1 million), or 0.99 reals per share ($0.17 per share), compared to the $0.15 per share in adjusted profits that Wall Street was looking for. The Brazilian fintech company now has an active client base of approximately 583,000, excluding the TON division.

Merchant leaning on a counter with glassware on shelves behind him and a Stone card-reading machine next to him

Image source: StoneCo.

"After two years as a public company, we are very proud to report a historic performance in the third quarter of 2020, with record [total payment volume], active client base, revenue and adjusted net income levels, despite the economic and health challenges brought by COVID-19," CEO Thiago Piau said in a statement. "Our business model proved itself resilient and well positioned to capture opportunities that arose amid the increase in electronic payments, digital commerce and recovery of overall retail sales."

Now what

StoneCo said that retail activity saw significant improvement in the third quarter, after Brazil was impacted heavily by the COVID-19 pandemic in Q2. Most economic sectors have now recovered to pre-coronavirus levels, excluding certain industries like travel and entertainment.

On the conference call with analysts, Piau said that the company expects total payment volume growth to continue accelerating heading into the fourth quarter.

Evan Niu, CFA 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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