Shares of StoneCo (STNE 5.01%) climbed as much as 10.8% early Monday then settled to close up around 2% after analysts at Goldman Sachs upgraded the Brazilian banking and financial-services company.
Why Goldman believes StoneCo is set to outperform
In a note to clients early Monday, an analyst team led by Goldman Sachs' Tito Labarta upgraded the firm's rating on StoneCo to buy from neutral and raised its per-share price target on the stock to $21 from $12. Labarta also upgraded fellow Brazilian fintech stock PagSeguro (NYSE: PAGS) to neutral from sell.
Labarta singled out StoneCo in particular as Goldman's top pick in the Brazilian payments industry, arguing it's poised to outperform, given a combination of positive tailwinds from government-banking initiatives, declining interest rates, and stabilizing growth trends. The team also noted that StoneCo is more effectively diversifying its revenue sources, with software-segment revenue projected to increase to 15% of its total in 2027 (up from 13% last year).
What's next for StoneCo investors?
On the heels of StoneCo's strong third-quarter results in November -- and largely for the same reasons Goldman cited today -- I recently argued the company is effectively firing on all cylinders as it remains on track for its first full-year profit after two straight years of losses.
Assuming the timing of StoneCo's past reports are any indication, it should be slated to release Q4 2023 results in mid-March 2024. But given this vote of confidence from Wall Street in the meantime, it's no surprise to see the stock rallying today.
