Hook and thesis
StoneCo (STNE) cratered after a volatile stretch earlier this year, but the selloff has created a clear risk/reward for disciplined buyers. The company reported solid underlying trends in its most recent quarter - double-digit sales growth and improving adjusted EPS - yet the market reacted negatively. At a current price of $14.28 and a market cap of roughly $3.87 billion, StoneCo now trades at single-digit multiples on adjusted earnings and below prior trading highs. We upgrade STNE to Buy and recommend an entry at $13.90, a stop loss at $10.50, and a target of $19.50 for a tactical mid-term swing.
Why the market should care - the business in plain terms
StoneCo is a Brazil-focused fintech that provides a cloud-based payments and merchant services platform across in-store, online, and mobile channels. The business combines transaction payments with higher-margin services like credit and automation tools — a model that can scale revenue per merchant as the credit product and SaaS offerings expand. Brazil remains an attractive addressable market because electronic payments and small/medium merchant digitization still have runway versus more mature economies.
Hard numbers that support the setup
- Market snapshot: Current price $14.28; market cap about $3.87 billion; shares outstanding ~270.86 million; float ~243.69 million.
- Valuation metrics: Reported P/E is 9.17 on reported earnings. Using the company’s adjusted annual EPS cited in coverage of $1.89, the stock trades closer to ~7.6x adjusted earnings at today's price ($14.28 / $1.89 = 7.55x).
- Recent operating results: In its most recent quarter the company grew sales ~17.5% year-over-year to R$14.2 billion and posted adjusted annual EPS growth of ~33.6% (adjusted EPS cited at $1.89). The quarter beat consensus on EPS (R$2.84 vs R$2.65 consensus on the reported per-share metric referenced in coverage).
- Technicals and market action: 50-day SMA is $15.45 (above current price), 10-day SMA $14.02, RSI ~48.4 indicating neutral momentum. Short interest has been meaningful recently (settlement 03/13/2026 short interest ~19.94 million shares; recent days-to-cover ~2.54), and short-volume activity has been elevated in late March and early April.
Valuation framing
At a market cap just under $4 billion and trading around $14, StoneCo's multiple is compelling relative to growth and profitability metrics disclosed in recent coverage. The company’s reported P/E of 9.17 is conservative compared with the adjusted-EPS-derived multiple near 7.6x; both are low for a fintech growing mid-teens on revenue and rapidly scaling adjunct credit revenue. The tangible valuation case is simple: if growth and margin expansion continue, the market will likely re-rate the business toward higher multiples; if not, downside is capped relative to current cash flows and a 52-week low near $9.83 provides a technical reference point.
Catalysts that could drive the trade
- Macro stabilization in Brazil - lower inflation and easing policy would improve merchant demand and credit quality, supporting multiple expansion.
- Execution on credit and value-added services - continued scaling of the higher-margin credit business and software/automation tools would lift blended margins.
- Short-covering dynamics - elevated short interest and sustained heavy short-volume create the technical backdrop for a rapid squeeze if volume tilts positive on good news.
- Follow-on beats or upgraded guidance - after a recent beat, a continued cadence of positive surprises will materially tighten the valuation gap versus peers.
Trade plan - exact entry, stop, target and horizon
| Action | Price |
|---|---|
| Entry | $13.90 |
| Stop loss | $10.50 |
| Target | $19.50 |
Horizon: This is primarily a mid-term trade designed to play out over roughly 45 trading days as the market digests any follow-on fundamental updates and technical positioning rebalances. If the trade moves quickly in our favor, consider trimming into strength near $17.50 and raising the stop. If the position fails and hits the stop at $10.50, the loss is controlled and preserves capital for re-assessment.
For active traders: a short-term (10 trading days) approach could be used to capture a bounce off the 10- to 20-day moving average ($14.02 - $13.96 range). For longer-term investors willing to ride through macro volatility, a position sized for a long-term horizon (180 trading days) could employ a wider stop and a higher target tied to a reversion toward prior highs ($19.95) and beyond if growth accelerates.
Why this is attractive now
The market's recent reaction has priced in a worst-case macro and FX narrative while the company showed concrete, positive operating metrics in its latest quarter. When a stock with strong short interest, neutral technicals, and single-digit adjusted earnings multiples gets a near-term washout, asymmetric upside can appear quickly. You are not buying perfection; you are buying a beaten-up fintech with real revenue growth, improving adjusted EPS, and a valuation that already reflects significant macro concerns.
Risks and counterarguments
- Macroeconomic and FX risk in Brazil - inflationary surprises, higher rates, or currency weakness could depress merchant volumes, increase credit losses, and compress multiples further.
- Execution risk on credit - scaling credit fast is capital intensive and can produce higher losses if underwriting lags or the economic environment deteriorates.
- Regulatory and political risk - Brazil’s regulatory environment for payments and fintech can change and materially affect market access or economics for StoneCo’s products.
- High short interest could exacerbate downside - while shorts can fuel squeezes, they can also accelerate declines if negative headlines or macro data arrive, producing a cascade beyond technical support levels.
- Valuation mismatch between GAAP and adjusted metrics - the stock’s P/E on reported earnings (9.17) vs adjusted-EPS multiples (near 7.6x) highlights that investor sentiment may penalize one-time items or accounting differences; if future reported results disappoint, multiples can re-compress.
Counterargument that deserves respect
Critics will point out that Brazil remains a volatile macro backdrop and that fintechs with credit exposure are particularly sensitive to rate cycles and inflation. Those concerns are valid: if Brazil slips into a renewed bout of economic stress, StoneCo’s credit portfolio and merchant volumes could deteriorate enough to justify the lower share price. The recent selloff partially reflects this fear, and it’s why position sizing and a disciplined stop are central to this trade idea.
What would change my mind
I would revisit the Buy rating if any of the following occur: (1) materially weaker-than-expected credit performance or a sharp rise in loan losses in subsequent reports; (2) regulatory actions in Brazil that restrict StoneCo’s product offerings or materially raise costs; (3) a persistent loss of gross transaction volume that signals secular customer attrition. Conversely, stronger-than-expected sequential growth in credit contribution, margin expansion, or clear signs of macro stabilization in Brazil would reinforce the Buy thesis and justify a more aggressive target.
Conclusion
StoneCo’s recent drop is not the result of a single fatal flaw in the business; it is primarily a function of macro anxiety and market volatility. The company delivered a quarter that beat on EPS and grew sales mid-teens year-over-year, yet the market punished the stock. That mismatch creates an actionable trade: enter at $13.90, protect capital with a $10.50 stop, and run the trade for the mid-term (~45 trading days) toward a $19.50 target. Keep position size prudent, monitor Brazil macro indicators and credit metrics closely, and be prepared to tighten stops or exit if the operational data turns negative.
Trade plan recap: Buy STNE at $13.90; stop $10.50; target $19.50; mid-term (45 trading days) horizon. Risk-manage tightly and watch credit metrics and Brazil macro data.