StoneCo (STNE 2.29%) stock is in something of a funk. Trading down roughly 84% from its pandemic-era highs, the Brazilian fintech stock doesn't get a lot of respect on Wall Street. Despite reporting its most profitable year ever in 2023, with $328 million in net income, StoneCo share prices are up only about 30% over the past year -- not a whole lot better than the S&P 500's 21% gain.
Better things could be coming for StoneCo investors, however. On Friday, Susquehanna Financial changed its price target on the stock from $23 to $22 a share, while maintaining its "positive" rating. Yes, the analyst lowered its price target, but if it's right about that, StoneCo shares could gain more than 44% over the next year or so.
NASDAQ: STNE
Key Data Points
Is StoneCo stock a buy?
Susquehanna noted that it was adjusting its price target primarily in response to StoneCo's press release earlier in the week that advised investors of a change in how the company accounts for membership fees paid to it by merchant customers. Specifically, instead of booking these fees as revenue immediately upon payment, StoneCo will begin stretching out these fees across the "expected lifetime" of merchant contracts.
It's important to realize that this won't affect the actual money StoneCo receives -- just the timing of when it's counted as revenue. And even then, the effect will be short-term in nature. For example, management reassured investors that while this quarter's revenue might dip, its forecast for 2024 as a whole remains unchanged. This means StoneCo still expects to boost its earnings by 22% this year. And it probably means that analysts' consensus forecast for long-term earnings growth -- also about 22% annually over the next five years -- is solid.
Investors can take some comfort in this. With StoneCo stock valued at a low 15.5 times earnings, a 22% long-term growth rate implies a pretty sizable discount to intrinsic value for StoneCo stock. If you ask me, Susquehanna's forecast of a 44% gain in StoneCo's share price sounds just about right.
