# STNE — StoneCo Ltd.

## Company & Research Metadata

- **Company:** StoneCo Ltd.
- **Ticker:** STNE
- **Exchange:** Nasdaq
- **Sector / Industry:** Financials / Brazilian merchant payments and banking
- **Template version:** 2.7
- **Research date:** 2026-10-21
- **Valuation / score price snapshot:** $7.39 — 2026-11-03 regular-session close, America/New_York
- **Tracking tier:** On the Radar
- **Owned:** Yes
- **Primary operating period reviewed:** Q2 2026
- **Historical period reviewed:** completed FY2024-FY2025; Q1 FY2026, Q2 FY2026, H1 FY2026
- **Latest investor presentation reviewed:** Results release and associated financial tables; no separate slide deck materially used
- **Latest earnings call reviewed:** Q2 2026, complete material Q&A
- **Latest post-earnings management commentary reviewed:** No separate later management presentation incorporated

- **Price snapshot date:** 2026-11-03

- **Price snapshot time / timezone:** Regular-session close, America/New_York (including exchange half-days)
- **Competitor / analyst-Q&A audit:** 2026-10-28; original operating, price and valuation snapshots retained.

## What's Changed Since Previous Review

**Current Review:** 2026-10-28

**Previous Review:** 2026-10-21

**Update Trigger:** Competitor relevance and analyst-Q&A correction

| Area | Previous View | Current View | Investment Impact |
|---|---|---|---|
| Competition | Preceding operating and comparable-company classifications | Product/customer/geographic boundaries corrected; direct rivals separated from substitutes, partners and valuation anchors | Corrects the competitive comparison; does not by itself re-underwrite the valuation |
| Analyst questions | Prior source-linked Q&A summaries | Complete questions and sentence-form management answers; all 9 existing rows retained | Improves readability while preserving the recorded exchange meaning |
| Valuation and scores | Approved operating/price snapshots, scenarios, scores and decisions | Preserved | No price refresh, rerank or change to valuation assumptions in this correction pass |

**Thesis:** No new fundamental thesis determination is made in this correction pass. The prior investment decision is preserved; the corrected competitive scope should govern the next substantive review.

## Investment Snapshot

| Metric | Current View |
|---|---|
| Price Snapshot | $7.39 — 2026-11-03 regular-session close, America/New_York |
| Rating / Zone Status | Buy |
| Bear / Base / Bull Fair Value | $4.50 / $17.48 / $32.47 |
| Scenario Probabilities | 30% / 50% / 20% |
| Probability-Weighted Fair Value | $16.58 |
| Probability-Weighted Expected Return | +124.4% |
| Bear-Case Return | -39.1% |
| Strong Buy Zone | ≤ $4.95 |
| Buy Zone | >$4.95–$13.26 |
| Avoid Chasing Above | > $18.42 |
| Quality Score / Tier | 65.1 / Tier B |
| Opportunity Score / Rank | 62.9 / #20 of 76 |
| Risk Level | High |
| Tracking / Ownership | On the Radar / Owned |

**Decision rationale:** STNE is **Buy** at $12.07, with +37.4% probability-weighted upside and -62.7% bear-case return. Distribution and merchant relationships can support recurring payments and financial-service earnings. Confidence is 41/100 because the earnings conversion, competitive and capital assumptions below remain conditional.

## Investment Thesis

Distribution and merchant relationships can support recurring payments and financial-service earnings. The low market multiple offers potential value, but Q2 continuing-operations revenue grew only 2.5% and credit provisions affected margins. The investment requires disciplined underwriting and capital allocation; low P/E alone does not compensate automatically for governance, FX and credit risk.

### What the Market May Be Mispricing

| Debate | Research judgment |
|---|---|
| Merchant payments growth and funding economics | Distribution and merchant relationships can support recurring payments and financial-service earnings. |
| Credit losses and capital requirements | Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value. |
| Governance, FX and capital returns | Q2 revenue and income from continuing operations were R$3.587 billion. |

## Business Overview

Stone provides payment acceptance, merchant banking and credit products in Brazil, focused on small and midsize businesses. Revenue combines processing, financial income and related services. Merchant advances, settlement obligations, deposits and lending create a balance sheet that cannot be analyzed like a simple software company. Business disposals and changes in reporting scope require continuing-operations comparisons.

### Business Takeaway

Stone provides payment acceptance, merchant banking and credit products in Brazil, focused on small and midsize businesses. Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value.

## Industry, TAM & Market Share

Brazil's digital payments and merchant banking remain substantial markets with intense competition from bank acquirers, digital banks and fintechs. Lower funding costs can help, while rate changes and merchant credit quality can reverse that benefit. Payment volume and credit exposure are different sources of risk.

### Market-Share Analysis

Comparable same-definition share data for the subject and its principal rivals were not established. TAM estimates and company-specific volume measures are not treated as directly comparable market shares. The positioning analysis below is more reliable than a table of unmatched percentages.

#### Competitive Scale / Position

| Company / Platform | Primary Position | Relative Scale | Growth Direction | Investment Relevance |
|---|---|---|---|---|
| PagBank (PAGS) | Direct: Brazilian acquiring and merchant banking | Product scope; no matched operating-scale series | Competes for Brazilian merchant relationships | Customer choice in the stated segment only |
| Cielo; Rede; Getnet | Direct: Brazilian merchant acquiring | Product scope; no matched operating-scale series | Competes on acquiring price and service | Customer choice in the stated segment only |
| Mercado Pago | Direct segment: Brazilian merchant payments and accounts | Product scope; no matched operating-scale series | Competes for merchant transaction flows | Customer choice in the stated segment only |

### Industry Takeaway

Payment volume and credit exposure are different sources of risk. The base case requires evidence of profitable adoption within that market.

## Customer Economics

Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value. Cross-selling credit can deepen relationships while increasing losses and capital needs. Settlement cash and loan sales can distort standardized FCF, making recurring common-holder earnings the better valuation anchor.

### Customer-Economics Takeaway

The economic test is Governance, FX and capital returns. Settlement cash and loan sales can distort standardized FCF, making recurring common-holder earnings the better valuation anchor.

## Competitive Landscape & Moat

### Competitive Landscape

Domestic merchant acquiring and banking define Stone’s core set. dLocal’s global cross-border merchant model and Nubank’s broader consumer bank are excluded as like-for-like peers.

| Competitor | Market Share | Positioning | Advantages vs. Company | Disadvantages vs. Company | Current Direction |
|---|---|---|---|---|---|
| PagBank (PAGS) | No consistent comparable series | Direct: Brazilian acquiring and merchant banking | Integrated merchant payments and account offering | Different merchant mix and credit exposure | Competes for Brazilian merchant relationships |
| Cielo; Rede; Getnet | No consistent comparable series | Direct: Brazilian merchant acquiring | Bank-linked merchant distribution | Different service and merchant-segment economics | Competes on acquiring price and service |
| Mercado Pago | No consistent comparable series | Direct segment: Brazilian merchant payments and accounts | Commerce ecosystem and merchant distribution | Not equivalent to all Stone SMB credit exposures | Competes for merchant transaction flows |

### Moat Assessment

Local distribution, service and integrated merchant relationships create a moderate advantage. Competition remains strong and customers can move among providers. Underwriting performance and service quality determine whether the relationship becomes durable.

**Moat direction:** Stable — an analytical judgment about product and distribution economics, not a measured market-share claim.

### Competitive Takeaway

Local distribution, service and integrated merchant relationships create a moderate advantage. The direct rivals determine commercial pressure; diversified or sector anchors provide valuation context and are not substitutes for direct competition.

## Financial Profile

### Historical Financials

**Standardized period history (reviewed 2026-11-07):** Completed issuer fiscal years only, plus actually disclosed standalone quarters and cumulative YTD for the latest open FY. Currency BRL, flows in millions, with fiscal dates defined by the issuer. Values marked derived come from disclosed period differences/sums, not TTM. Missing = N/D (not zero). Q1/Q2/1H revenue uses continuing operations after divestitures, whereas the historical annual figures use earlier standardized classifications; growth and margins are not directly comparable. Current quarter FCF is consolidated CFO less property/equipment and purchased/developed intangible costs; merchant settlement and credit cashflows make this an unreliable owner-cash proxy.

| Period | Revenue | Growth | Gross Margin | Operating Margin | FCF | FCF Margin | SBC | Diluted Shares | Cash | Debt |
|---|---:|---:|---:|---:|---:|---:|---:|---:|---:|---:|
| FY2024 | 11,551 | 14.47% | 75.48% | 48.89% | -3,746 | -32.43% | 232.67 | 308 | 5,746 | 12,896 |
| FY2025 | 13,400 | 16.00% | 74.88% | 48.64% | 556.7 | 4.15% | 297.02 | 273 | 5,941 | 17,582 |
| Q1 FY2026 | 3,578M | N/D | N/D | N/D | 3,060.8M | 85.5% | 111.3M | N/D | N/D | N/D |
| Q2 FY2026 | 3,587.4M | N/D | N/D | N/D | 1,446.4M | 40.3% | 59.2M | N/D | N/D | N/D |
| H1 FY2026 | 7,165.4M (derived from disclosed periods) | N/D | N/D | N/D | 4,507.2M (derived from disclosed periods) | 62.9% | 170.5M (derived from disclosed periods) | N/D | N/D | N/D |

### Financial Takeaways

Q2 revenue and income from continuing operations were R$3.587 billion. Management-defined adjusted gross margin was 43.6%, with credit provisions offsetting some funding improvements. Provider-standardized margins use different classifications and should not be mixed with this definition. The model values sustainable USD EPS after credit costs and compensation, with a higher discount rate for Brazil, FX and governance risk.

The historical series is standardized BRL and differs from management’s continuing-operations revenue and adjusted profit. Forecast EPS is USD per listed share, with BRL5.25/USD assumed. Settlement cash, credit funding and discontinued operations make unadjusted industrial EV/FCF misleading.

**Financial direction:** Deteriorating — assess the reported trend alongside dilution and the balance sheet.

## Management & Capital Allocation

Capital returns can create value at a low multiple if supported by durable earnings and adequate capital. Monitor governance, disposal proceeds, buyback pricing and credit discipline. Past credit problems make realized loss experience more important than optimistic portfolio growth targets.

### Management Takeaway

Past credit problems make realized loss experience more important than optimistic portfolio growth targets.

## Valuation

### Current Valuation

| Metric | Value |
|---|---|
| Price Snapshot | $7.39 — 2026-11-03 regular-session close, America/New_York |
| Market Capitalization | $2.78B |
| Enterprise Value | N/A — not used; see capital/settlement accounting discussion |
| Trailing P/E | 4.80 |
| Provider forward P/E | 5.43 |
| EV / Sales | N/A — unadjusted metric excluded |

### Comparable Company Analysis

| Company | Relevance | Public / Private | Forward P/E | EV / Sales | Growth / Margin / Risk Context |
|---|---|---|---|---|---|
| STNE — StoneCo Ltd. | Subject company | Public | 5.43 | N/A — financial / share-class mismatch | Brazilian merchant payments and banking; 3Y revenue-growth estimate 7.01%; operating margin 45.67% |
| Brazilian incumbent bank acquirers | Direct operating competitor / substitute | Operating businesses within listed banks | N/A | N/A | merchant acquiring and credit distribution; no compatible standalone public multiple used |
| PAGS — PagSeguro/PagBank | Direct Brazilian merchant acquiring/banking comparator | Public | 6.36 | 0.86 | Brazilian acquiring and merchant banking; 3Y revenue-growth estimate 3.78%; operating margin 37.76% |
| Cielo; Rede; Getnet | Direct: Brazilian merchant acquiring | Mixed / standalone valuation not used | N/D — no matched snapshot collected | N/D — no matched snapshot collected | Competes on acquiring price and service |
| Mercado Pago | Direct segment: Brazilian merchant payments and accounts | Operating product / listed parent | N/D — no matched snapshot collected | N/D — no matched snapshot collected | Competes for merchant transaction flows |

**Comparable takeaway:** Domestic merchant acquiring and banking define Stone’s core set. dLocal’s global cross-border merchant model and Nubank’s broader consumer bank are excluded as like-for-like peers. Quoted multiples retain their original dated snapshot; missing matched multiples are not estimated. Consolidated parent multiples do not isolate the competing product. No mechanical peer average is used.

The base terminal P/E is 10×, versus the provider's current forward P/E of 5.43×. Holding that quoted multiple constant on this model's 2029 EPS gives an illustrative present value of **$9.49**, versus the central base FV of **$17.48**. Earnings definitions differ, so this is a sensitivity check; it makes the dependence on a rerating or derating explicit.

### Valuation Scenarios

| Scenario | Key Assumptions | Fair Value | Probability | Probability Rationale | Return From Price Snapshot |
|---|---|---|---|---|---|
| Bear | 3Y revenue CAGR 0%; sustainable 2029 EPS $1.20 after compensation; 6× P/E; 17% discount rate; Credit and FX pressure limit 2029 USD EPS to $1.20. | $4.50 | 30% | Execution, financing or competitive setbacks remain credible | -39.1% |
| Base | 3Y revenue CAGR 10%; sustainable 2029 EPS $2.80 after compensation; 10× P/E; 17% discount rate; Stable merchant economics and disciplined capital returns produce $2.80 of 2029 USD EPS. | $17.48 | 50% | Most likely operating trajectory, requiring measurable progress | +136.5% |
| Bull | 3Y revenue CAGR 18%; sustainable 2029 EPS $4.00 after compensation; 13× P/E; 17% discount rate; Successful cross-sell and controlled credit losses produce $4 of 2029 USD EPS. | $32.47 | 20% | Successful product conversion and operating leverage; not assured | +339.4% |
| **Probability-Weighted** | Sum of each scenario value × its probability | $16.58 | **100%** | Judgmental scenario probabilities | +124.4% |

### Valuation Takeaway

- **Primary valuation method:** Present value of sustainable 2029 equity earnings × scenario P/E, plus assumed interim dividends. The three-year discount horizon approximates late-2029 earning power.
- **Cross-check methods:** Direct competition, quoted peer multiples, current cash conversion, and the separate revenue/share/net-margin bridge in [the valuation workpaper](../valuation/watchlist_models_2026-10-21.md).
- **Key valuation dependencies:** Merchant payments growth and funding economics; Credit losses and capital requirements; Governance, FX and capital returns. All forward figures are independent research assumptions, not company guidance or consensus.
- **Valuation confidence / Risk Level:** 41/100 / High. Scenario values are sensitive to sustainable earnings and terminal multiples.
- **Margin-of-safety conclusion:** Buy at $12.07. New-file boundaries use Strong Buy = min(P/W FV ÷ 1.5, 1.1 × bear FV), Buy upper = P/W FV ÷ 1.25, Avoid above = P/W FV ÷ 0.90. Returns are to present fair value, not annualized returns or price targets for a particular date.

## Analyst Questions

The table consolidates related questions and follow-ups from each material participant in the complete call.

| Analyst / Firm | Core Question | Management Response | Research Read-Through |
|---|---|---|---|
| Eric Ito / Bradesco BBI | What drives allowances and the credit-loss outlook? | Management said losses are elevated and normalization is expected later. | Treat the stated timetable as conditional on demonstrated execution. |
| Daniel Vaz / Safra | What is needed to achieve full-year guidance? | Management said second-half transaction acceleration is required. | Treat the stated timetable as conditional on demonstrated execution. |
| Antonio Ruette / BofA | How do large borrower defaults affect reported delinquency? | Management said concentrated exposures affect the reported figures. | Confirm that this opportunity converts into profitable recurring demand. |
| Neha Agarwala / HSBC | How are Ton and SMB customer economics assessed? | Management said it evaluates the whole customer relationship. | Confirm that this opportunity converts into profitable recurring demand. |
| Arnon Shirazi / Citi | How quickly can communication and service problems affecting churn be fixed? | Management said service fixes need time. | Confirm that this opportunity converts into profitable recurring demand. |
| Renato Meloni / Autonomous Research | What affects quarterly transaction-revenue comparisons? | Management said quarterly incentives affect the comparison. | Confirm that this opportunity converts into profitable recurring demand. |
| Pedro Leduc / Itaú BBA | How do deposits affect funding costs as assets grow? | Management said deposits help, but asset growth may outpace them. | Require durable cash conversion after compensation and ongoing investment. |
| Guilherme Grespan / JPMorgan | How do government lending guarantees affect credit risk and provisions? | Management said guarantees change risk without eliminating all provisions. | Confirm that this opportunity converts into profitable recurring demand. |
| Kaio Prato / UBS | How do credit and POS accounting changes affect balance-sheet comparisons? | Management said reclassifications distort the comparisons. | Confirm that this opportunity converts into profitable recurring demand. |

### Analyst-Q&A Takeaway

Credit allowances and customer churn are material challenges; management expects improvement rather than demonstrating it. Guarantees and accounting reclassifications do not eliminate underwriting risk or the need for stronger transaction growth.

## Thesis Monitoring

| Driver | Current State | Positive Trigger / Catalyst | Negative Trigger / Falsifier | What It Changes |
|---|---|---|---|---|
| Merchant payments growth and funding economics | Distribution and merchant relationships can support recurring payments and financial-service earnings. | Revenue trajectory sustains approximately 10% annual growth on a comparable basis | Growth remains below the 0% bear assumption over a full operating cycle | Revenue outlook and scenario probabilities |
| Credit losses and capital requirements | Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value. | After-cost earnings progress toward the base implied net margin of 17.6% | Competition, credit losses or service costs make that margin trajectory unattainable | Margins, moat score and valuation multiple |
| Governance, FX and capital returns | Q2 revenue and income from continuing operations were R$3.587 billion. | Financing and compensation remain consistent with 217.0M economic shares in the 2029 base case | Required capital or cumulative dilution materially exceeds the model without matching earnings | Financial score, confidence and downside value |

## Quality & Opportunity Scorecards

### Quality Score

| Component | Score | Weight | Weighted Contribution | Evidence |
|---|---|---|---|---|
| Business durability and economics | 70 | 25% | 17.5 | Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value. |
| Moat and competitive position | 65 | 25% | 16.3 | Local distribution, service and integrated merchant relationships create a moderate advantage. |
| Growth runway and durability | 71 | 20% | 14.2 | Brazil's digital payments and merchant banking remain substantial markets with intense competition from bank acquirers, digital banks and fintechs. |
| Financial quality and balance sheet | 58 | 15% | 8.7 | Q2 revenue and income from continuing operations were R$3.587 billion. |
| Management, governance and capital allocation | 56 | 15% | 8.4 | Capital returns can create value at a low multiple if supported by durable earnings and adequate capital. |
| **Quality Score** | **65.1** | **100%** | **65.1** | Weighted score, independent of ownership and current price |

- **Quality Tier:** B
- **Speculative override:** None

### Opportunity Score

| Component | Raw Input | Normalized Score | Weight | Weighted Contribution |
|---|---|---|---|---|
| Quality | 65.1 | 65.1 | 30% | 19.5 |
| Probability-weighted upside | +124.4% | 100.0 | 35% | 35.0 |
| Bear-case downside | -39.1% | 10.9 | 20% | 2.2 |
| Risk / valuation confidence | 41 | 41.0 | 15% | 6.1 |
| **Opportunity Score** |  | **62.9** | **100%** | **62.9** |

- **Opportunity Rank:** #20 of 76
- **Zone Status:** Buy

## Portfolio Context

- **Tracking tier:** On the Radar
- **Owned:** Yes
- **Tracking source of truth:** `ontheradar.md`
- **Portfolio source of truth:** `portfolio/holdings.md`
- **Scoring independence:** Ownership, account, shares, position size and cost basis do not change research, valuation, Quality, Opportunity, rank or zones.

## Investment Decision History

| Timestamp | Price | Rating | Zone Status | Buy Zone | Strong Buy Zone | Avoid Chasing Above | Base FV | P/W FV | P/W Return | Quality | Opportunity / Rank | Change / Rationale |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2026-10-21 (America/New_York) | $12.07 | Buy | Buy | >$4.95–$13.26 | ≤ $4.95 | > $18.42 | $17.48 | $16.58 | +37.4% | 65.1 | 60.7 / #24 | Initial missing-file analysis; common-universe ranking; independent scenario assumptions |

---

## Material Sources

| Source | Type | Date / Period | What It Supports |
|---|---|---|---|
| [www.sec.gov](https://www.sec.gov/Archives/edgar/data/1745431/000207097926000275/stoneco_earningsrelease2q2.htm) | Company IR / earnings filing | Q2 2026 | Latest operating results, guidance, products and financial supplement |
| [STNE complete earnings-call transcript](https://stockanalysis.com/stocks/stne/transcripts/669414-q2-2026/) | Transcript | Q2 2026 | Prepared remarks and all material Q&A exchanges |
| [STNE regular-session historical price](https://stockanalysis.com/stocks/stne/history/) | Market data | 2026-10-20 close | Common price used in returns, scores and zones |
| [STNE valuation statistics](https://stockanalysis.com/stocks/stne/statistics/) | Market data | 2026-10-20 close; ratios retrieved 2026-10-21 | Market capitalization, shares, quoted multiples and current ratios |
| [STNE historical income statement](https://stockanalysis.com/stocks/stne/financials/income-statement/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical income statement; source-native currency and definitions |
| [STNE historical balance sheet](https://stockanalysis.com/stocks/stne/financials/balance-sheet/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical balance sheet; source-native currency and definitions |
| [STNE historical cash flows](https://stockanalysis.com/stocks/stne/financials/cash-flow-statement/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical cash flows; source-native currency and definitions |
| [PagSeguro/PagBank statistics](https://stockanalysis.com/stocks/pags/statistics/) | Comparable-company market data | 2026-10-20 regular close | Peer multiples and financial context; public quote basis |