StoneCo Ltd. (STNE): A Bear Case Theory
We came across a bearish thesis on StoneCo Ltd. (STNE) on Quipus Capital's Substack. In this article, we will summarize the bears' thesis on STNE. StoneCo Ltd. (STNE)'s share was trading at $13.51 as of 6th June. STNE's trailing and forward P/E were 11.42 and 9.68 respectively according to Yahoo Finance.
StoneCo Ltd. (STNE), is deeply entrenched in Brazil's payment processing ecosystem, with a business model centered on receivables discounting rather than the processing layer, which has been heavily commoditized. STNE advances funds to merchants on credit card sales, earning high-yield, low-risk returns that are essentially underwritten by card issuers or networks. This model thrives among small businesses with limited credit access, where urgency often trumps cost.
However, STNE's growth potential faces headwinds in the market: a saturated market growing only in line with GDP plus inflation, and a capped receivables base tied to one month's worth of payment volumes. Compounding this is the risk posed by PIX Parcelado, a government-backed initiative allowing installment payments directly via banks, which could disintermediate STNE from the receivables chain.
While STNE has explored traditional credit markets, its previous attempts led to high delinquencies and an eventual retreat. The company lacks the competitive advantage to rival Brazil's full-service digital and incumbent banks. Despite these challenges, STNE remains highly profitable, and management is focused on balance sheet optimization through share buybacks and modest leverage. Assuming stable pricing and spreads, STNE can deliver around 11% from buybacks at a 9x P/E, and add another 5–7% from underlying economic growth.
While the upside from fixed-multiple returns and efficient capital allocation is compelling, it's counterbalanced by the real possibility of margin erosion or disintermediation. For investors, the key question is whether these tailwinds are enough to justify the risk of business model disruption in an evolving payments landscape.
Previously, we summarized a bullish thesis on SoFi Technologies, highlighting its rapid digital bank user growth, expanding product engagement, and forward profitability inflection, framing its 2026 earnings potential as a catalyst for valuation rerating. The stock has appreciated by approximately 4% since the recent coverage. Together, these two theses present a tale of fintech divergence: one banking on digital ecosystem scale and future earnings leverage (SoFi), the other navigating a legacy-dependent niche facing structural headwinds (StoneCo)
StoneCo Ltd. (STNE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held STNE at the end of the first quarter which was 24 in the previous quarter. While we acknowledge the risk and potential of STNE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
3 days ago
- Yahoo
StoneCo Ltd. (STNE): A Bear Case Theory
We came across a bearish thesis on StoneCo Ltd. (STNE) on Quipus Capital's Substack. In this article, we will summarize the bears' thesis on STNE. StoneCo Ltd. (STNE)'s share was trading at $13.51 as of 6th June. STNE's trailing and forward P/E were 11.42 and 9.68 respectively according to Yahoo Finance. StoneCo Ltd. (STNE), is deeply entrenched in Brazil's payment processing ecosystem, with a business model centered on receivables discounting rather than the processing layer, which has been heavily commoditized. STNE advances funds to merchants on credit card sales, earning high-yield, low-risk returns that are essentially underwritten by card issuers or networks. This model thrives among small businesses with limited credit access, where urgency often trumps cost. However, STNE's growth potential faces headwinds in the market: a saturated market growing only in line with GDP plus inflation, and a capped receivables base tied to one month's worth of payment volumes. Compounding this is the risk posed by PIX Parcelado, a government-backed initiative allowing installment payments directly via banks, which could disintermediate STNE from the receivables chain. While STNE has explored traditional credit markets, its previous attempts led to high delinquencies and an eventual retreat. The company lacks the competitive advantage to rival Brazil's full-service digital and incumbent banks. Despite these challenges, STNE remains highly profitable, and management is focused on balance sheet optimization through share buybacks and modest leverage. Assuming stable pricing and spreads, STNE can deliver around 11% from buybacks at a 9x P/E, and add another 5–7% from underlying economic growth. While the upside from fixed-multiple returns and efficient capital allocation is compelling, it's counterbalanced by the real possibility of margin erosion or disintermediation. For investors, the key question is whether these tailwinds are enough to justify the risk of business model disruption in an evolving payments landscape. Previously, we summarized a bullish thesis on SoFi Technologies, highlighting its rapid digital bank user growth, expanding product engagement, and forward profitability inflection, framing its 2026 earnings potential as a catalyst for valuation rerating. The stock has appreciated by approximately 4% since the recent coverage. Together, these two theses present a tale of fintech divergence: one banking on digital ecosystem scale and future earnings leverage (SoFi), the other navigating a legacy-dependent niche facing structural headwinds (StoneCo) StoneCo Ltd. (STNE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held STNE at the end of the first quarter which was 24 in the previous quarter. While we acknowledge the risk and potential of STNE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey.
Yahoo
4 days ago
- Yahoo
PagSeguro Digital Ltd. (PAGS): A Bear Case Theory
We came across a bearish thesis on PagSeguro Digital Ltd. (PAGS) on Quipus Capital's Substack. In this article, we will summarize the bears' thesis on PAGS. PagSeguro Digital Ltd. (PAGS)'s share was trading at $8.78 as of 6th June. PAGS's trailing and forward P/E were 7.23 and 6.56 respectively according to Yahoo Finance. Photo by Clay Banks on Unsplash PagSeguro Digital Ltd. (PAGS) operates as a Brazilian payment processor with a core business model built around receivables discounting rather than payment processing itself. While many assume that PAGS earns margins on payment transactions, the reality is that most of the take rate is paid out in interchange and transaction fees, leaving processing effectively commoditized. The real profit engine is in advancing payments to merchants on credit card sales in exchange for a 2% monthly discount fee, amounting to annualized rates of 25–30%, with minimal risk, as receivables are guaranteed by banks or card networks. This business is especially viable among micro and small merchants, who lack access to traditional credit. However, the company's growth is constrained by a saturated market; PAGS now grows in line with Brazil's GDP plus inflation, and its receivables remain capped at roughly 30–35% of TPV. Further, the looming launch of PIX Parcelado threatens to disrupt the receivables model, allowing banks to offer credit-based instant payments that bypass PAGS entirely on the lucrative discounting side. Although PAGS could theoretically expand into other lending products, it lacks both the scale and risk infrastructure to compete with Brazil's established banks. In a best-case scenario, PAGS maintains current spreads, leverages its low-risk balance sheet, and grows EPS via share buybacks. At a 7x P/E, the stock could deliver a 14% return from buybacks alone, with 5–7% BRL-denominated growth on top. Yet, investors must weigh this against significant structural risk, particularly from PIX, and limited runway for long-term business expansion. Previously, we summarized a on Block, Inc., highlighting its evolution into a vertically integrated fintech ecosystem spanning consumer finance, business services, and AI-powered infrastructure, supported by scale advantages in Cash App and Square, improved profitability, and underappreciated assets like Tidal. Together, these theses capture a broader fintech divide: one leaning into innovation and ecosystem synergy to unlock durable value (Block), the other constrained by structural ceilings and rising platform risk (PagSeguro). PagSeguro Digital Ltd. (PAGS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held PAGS at the end of the first quarter which was 36 in the previous quarter. While we acknowledge the risk and potential of PAGS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
4 days ago
- Yahoo
StoneCo Ltd. (STNE): A Bear Case Theory
We came across a bearish thesis on StoneCo Ltd. (STNE) on Quipus Capital's Substack. In this article, we will summarize the bears' thesis on STNE. StoneCo Ltd. (STNE)'s share was trading at $13.51 as of 6th June. STNE's trailing and forward P/E were 11.42 and 9.68 respectively according to Yahoo Finance. StoneCo Ltd. (STNE), is deeply entrenched in Brazil's payment processing ecosystem, with a business model centered on receivables discounting rather than the processing layer, which has been heavily commoditized. STNE advances funds to merchants on credit card sales, earning high-yield, low-risk returns that are essentially underwritten by card issuers or networks. This model thrives among small businesses with limited credit access, where urgency often trumps cost. However, STNE's growth potential faces headwinds in the market: a saturated market growing only in line with GDP plus inflation, and a capped receivables base tied to one month's worth of payment volumes. Compounding this is the risk posed by PIX Parcelado, a government-backed initiative allowing installment payments directly via banks, which could disintermediate STNE from the receivables chain. While STNE has explored traditional credit markets, its previous attempts led to high delinquencies and an eventual retreat. The company lacks the competitive advantage to rival Brazil's full-service digital and incumbent banks. Despite these challenges, STNE remains highly profitable, and management is focused on balance sheet optimization through share buybacks and modest leverage. Assuming stable pricing and spreads, STNE can deliver around 11% from buybacks at a 9x P/E, and add another 5–7% from underlying economic growth. While the upside from fixed-multiple returns and efficient capital allocation is compelling, it's counterbalanced by the real possibility of margin erosion or disintermediation. For investors, the key question is whether these tailwinds are enough to justify the risk of business model disruption in an evolving payments landscape. Previously, we summarized a bullish thesis on SoFi Technologies, highlighting its rapid digital bank user growth, expanding product engagement, and forward profitability inflection, framing its 2026 earnings potential as a catalyst for valuation rerating. The stock has appreciated by approximately 4% since the recent coverage. Together, these two theses present a tale of fintech divergence: one banking on digital ecosystem scale and future earnings leverage (SoFi), the other navigating a legacy-dependent niche facing structural headwinds (StoneCo) StoneCo Ltd. (STNE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held STNE at the end of the first quarter which was 24 in the previous quarter. While we acknowledge the risk and potential of STNE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey.
