Shares of StoneCo (STNE 1.76%) 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.
Steve Symington has positions in StoneCo. The Motley Fool has positions in and recommends PagSeguro Digital and StoneCo. The Motley Fool has a disclosure policy.
