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Why StoneCo Stock Sank by 9% Today

By Brett Schafer – Dec 16, 2021 at 1:27PM

Key Points

  • StoneCo fell Thursday morning in correlation with a broad sell-off in high-growth stocks.
  • The stock is now down by more than 50% in the past month.
  • Its price-to-sales ratio is at one of its lowest points in its history as a publicly-traded company.

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The Brazilian fintech company is now down by more than 80% year to date.

What happened

Shares of StoneCo (STNE 2.38%) were trading down by 9.1% as of 1 p.m. ET on Thursday. The Brazilian financial technology firm has been on a downward slide since it reported third-quarter earnings in November, and is likely seeing correlations with the Nasdaq 100 Index, which was down by 2.3% at that point of the trading day.

So what

StoneCo delivered its Q3 earnings results on Nov. 16, reporting a quarterly loss of $0.78 per share. That was far worse than analysts' consensus prediction of a loss of $0.12 per share. While revenue of $281 million beat analysts' expectations, the earnings miss is likely a big reason why the stock has fallen by more than 50% in the last month. 

A man disappointed leaning against a window.

Image source: Getty Images.

StoneCo's share price also tends to be correlated to the high-growth technology and internet stocks in the Nasdaq 100 Index, which has had a rough few trading days. For example, the Ark Innovation ETF (ARKK 3.76%), which owns a lot of these high-growth companies -- and actually has a small position in StoneCo -- was down by 3.8% as of this writing.

Now what

StoneCo has had a rough 2021. After its recent price drops, the stock is now down 82% year to date. This doesn't mean the business is in shambles, but investors are definitely a lot less bullish about the company than they were at the start of the year. With a market cap of $4.77 billion, the company now trades at a price-to-sales ratio (P/S) of 6.9, one of the lowest valuations it has ever traded at by that metric. That alone doesn't mean StoneCo is a buy here, but it could provide a nice buying opportunity for anyone who is bullish on the company and has a long investing time horizon. 

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool owns and recommends Stoneco LTD. The Motley Fool has a disclosure policy.

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