What happened

Shares of StoneCo (STNE 0.59%) dropped by as much as 5% despite getting a bullish vote of confidence from Wall Street. The broader market is aggressively selling off as retail traders drive significant volatility in stocks with high short interest, which is reverberating throughout the market and creating turmoil. As of 3 p.m. EST, StoneCo shares were down 3%.

So what

Citi resumed coverage of StoneCo this morning, giving the Brazilian fintech company a buy rating while increasing its price target from $58 to $86, approximately 16% upside from yesterday's close. Analyst Jorg Friedemann acknowledges that there isn't a lot of near-term insight into the potential benefits of Stone's acquisition of Linx (LINX), but the deal could still potentially help boost revenue growth and margin expansion.

Red stock chart going down

Image source: Getty Images.

Stone and Linx revised their merger agreement late last year, boosting its offer to 6.8 billion Brazilian real, or about $1.28 billion at the time. That represents around $1.24 billion at current exchange rates, and the transaction has not yet closed.

Now what

Linx shareholders have already approved the acquisition but the companies still need to secure various other regulatory approvals in order to close the deal.

Stone recently raised 493 million real in fresh capital to help fund its credit offerings for small and medium-sized businesses (SMB) in Brazil. The company has not yet announced when it will report fourth-quarter earnings, but analysts are modeling for $201.4 million in sales and earnings per share of $0.23.