StoneCo Ltd. (STNE): A Bear Case Theory
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.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
34 minutes ago
- Yahoo
How the World's 5 Youngest Billionaires Built — or Inherited — Their Empires
At an age when most people are just beginning their careers, these five individuals have already secured a place in the billionaires' club. According to Forbes Middle East's 2025 list, the world's youngest billionaires come from a diverse mix of industries, including gaming, manufacturing, artificial intelligence (AI) and pharmaceuticals. Some inherited vast fortunes, while others are building business empires from the ground up. Below is how the world's youngest billionaires made their fortunes. Also here are the first jobs of famous billionaires. Read Next: For You: Lívia Voigt de Assis Age: 20 Source of Wealth: Industrial Machinery Net Worth: $1.2 Billion Brazilian billionaire Lívia Voigt de Assis holds a 3.1% stake in WEG Industries, a multinational giant that manufactures electric motors, automation systems and energy technology. The company, co-founded by her grandfather Werner Ricardo Voigt, is listed on Brazil's stock exchange and stands as one of the country's most valuable industrial firms. Though Voigt de Assis doesn't play an active role in the business, her wealth is secured through family trusts and stock ownership. Along with her sister, who also holds a 3.1% stake, she represents the next generation of one of Brazil's most influential industrial dynasties. See Next: Clemente Del Vecchio Age: 20 Source of Wealth: Eyewear Net Worth: $6.6 Billion Italian heir Clemente Del Vecchio became a billionaire at just 18 following the 2022 death of his father, Leonardo Del Vecchio, the legendary founder of Luxottica — the eyewear empire behind Ray-Ban, Oakley and more. Del Vecchio inherited a 12.5% stake in Delfin, the family holding company that controls major shares in EssilorLuxottica, as well as investments in insurance and banking. He currently holds no executive role but benefits from a well-structured family trust. Del Vecchio isn't the only heir, his older half-brothers, Luca and Leonardo Maria, also joined the billionaire ranks through similar inheritances. Johannes von Baumbach Age: 19 Source of Wealth: Pharmaceuticals Net Worth: $5.4 Billion Johannes von Baumbach is the youngest known heir to Germany's Boehringer Ingelheim pharmaceutical fortune. The family-owned company is one of the largest in the country, known for its innovations in both human and veterinary medicine. Details about von Baumbach's involvement in the company are limited, as the family maintains a low profile. Leadership of the company remains with his uncle Hubertus von Baumbach. Outside of business, von Baumbach is reportedly a competitive skier based in Austria. His net worth of $5.4 billion reflects his stake in a pharmaceutical legacy built on generations of family leadership and innovation. Alexandr Wang Age: 28 Source of Wealth: AI Net Worth: $2 Billion Alexandr Wang is the world's youngest self-made billionaire and the co-founder of Scale AI. The company specializes in data labeling for training AI models and supporting autonomous vehicles. Wang dropped out of MIT as a freshman and launched Scale in 2016 with co-founder Lucy Guo. Scale AI has since attracted high-profile clients like Meta, Microsoft and General Motors. It recently raised $1 billion at a valuation of $13.8 billion. Wang's estimated 14 percent ownership gives him a net worth of $2 billion and positions him as a major figure in the AI sector. Ed Craven Age: 29 Source of Wealth: Online Casino Net Worth: $2.8 Billion Ed Craven is a self-made billionaire from Australia and the co-founder of a fast-growing online casino that specializes in crypto gambling. Alongside partner Bijan Tehrani, Craven helped build the platform into a global powerhouse, generating $4.7 billion in revenue last year. Despite regulatory challenges in regions like the United States and the United Kingdom, has gained popularity through livestreamers and influencers. The platform reportedly accounts for up to 4 percent of all global Bitcoin transactions, reflecting its enormous reach. Craven's fortune reflects both innovative thinking and perfect timing in a rapidly evolving digital market. More From GOBankingRates 5 Old Navy Items Retirees Need To Buy Ahead of Fall Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy This article originally appeared on How the World's 5 Youngest Billionaires Built — or Inherited — Their Empires
Yahoo
39 minutes ago
- Yahoo
Prediction: Buying MercadoLibre Today Could Set You Up for Life
Key Points MercadoLibre is one of the world's fastest growing e-commerce companies. It has plenty of room to grow in Latin America. It still looks reasonably valued relative to its long-term growth potential. 10 stocks we like better than MercadoLibre › MercadoLibre (NASDAQ: MELI), Latin America's largest e-commerce company, went public at $18 a share in 2007. Today, its stock trades at about $2,330. That 12,844% gain would have turned a $10,000 investment into $1.29 million. From 2007 to 2024, MercadoLibre's annual revenue grew at a stunning CAGR of 38%. It established a first mover's advantage in Latin America's fertile e-commerce market, expanded its logistics network across the region's challenging terrain, and locked its shoppers into its Mercado Pago digital payments platform and other fintech services. MercadoLibre also turned profitable again in 2021, and its annual net income increased at a whopping CAGR of 184% over the following three years. Its profits surged as it sold more higher-margin products on its first-party marketplace, generated higher-margin revenue from its third-party marketplace, expanded its higher-margin credit and advertising segments, and leveraged its economies of scale to dilute its logistics, payment processing, and marketing expenses. Those growth rates are incredible, but some investors might be reluctant to buy MercadoLibre's stock after those multibagger gains. However, I believe buying MercadoLibre's stock today could still set you up for life for three simple reasons. 1. It hasn't saturated its core markets yet MercadoLibre operates its marketplace in 19 Latin American countries. However, it generates most of its revenue in Brazil, Argentina, and Mexico -- and it still has plenty of room to grow in smaller markets like Chile, Colombia, Peru, and Ecuador. At the end of 2024, MercadoLibre served more than 100 million annual unique active buyers and 60 million fintech monthly active users. But that's just a fraction of the 668 million people (including 451 million adults) who live in the Latin American and Caribbean region. Latin America's population is also expected to keep growing through 2050. That low penetration rate gives MercadoLibre plenty of room to expand its e-commerce and fintech platforms. Grand View Research expects Latin America's e-commerce market to grow at a CAGR of 16.7% from 2024 to 2030. IMARC Group predicts the region's fintech market will expand at a CAGR of 15.9% from 2025 to 2033. If MercadoLibre stays at the top of those booming markets, it will likely generate double-digit sales growth for the foreseeable future. 2. It's growing a lot faster than its overseas competitors From 2024 to 2027, analysts expect MercadoLibre's revenue and EPS to grow at a CAGR of 27% and 34%, respectively. That makes it one of the world's fastest-growing e-commerce companies. By comparison, analysts expect Amazon (NASDAQ: AMZN) and Sea Limited (NYSE: SE) -- which both tried in vain to challenge MercadoLibre in Latin America -- to grow their revenue at a CAGR of 11% and 21%, respectively, from 2024 to 2027. 3. It looks reasonably valued relative to its growth potential MercadoLibre's stock has already rallied nearly 40% this year, but it still doesn't seem too pricey relative to its e-commerce peers at 35 times next year's earnings. Amazon trades at 29 times forward earnings, while Sea trades at a higher forward multiple of 40. MercadoLibre's valuations are likely being compressed by the near-term concerns about tariffs, inflation, and political unrest across several of its top markets. The devaluation of Latin American currencies against the U.S. dollar (in which MercadoLibre reports its earnings) could be exacerbating that pressure. But if those headwinds eventually dissipate, MercadoLibre's stock could command a much higher valuation again. How much bigger could MercadoLibre grow? Assuming MercadoLibre matches analysts' expectations through 2027, grows its EPS at a robust CAGR of 20% over the following 18 years, and trades at a reasonable 30 times earnings by the final year, its stock price could potentially climb more than 30 times to $71,480 by 2045. That price target sounds high, but it would only boost its market cap to $3.6 trillion. For reference, Amazon currently has a market cap of $2.4 trillion -- and it will likely be worth a lot more in 20 years. Therefore, if you expect MercadoLibre to maintain its leading position in Latin America's e-commerce and fintech markets, expand its margins as it scales up its business, and weather the region's near-term macro headwinds, then it's still an excellent long-term buy. Should you invest $1,000 in MercadoLibre right now? Before you buy stock in MercadoLibre, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and MercadoLibre wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $668,155!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,106,071!* Now, it's worth noting Stock Advisor's total average return is 1,070% — a market-crushing outperformance compared to 184% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 13, 2025 Leo Sun has positions in Amazon and MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Sea Limited. The Motley Fool has a disclosure policy. Prediction: Buying MercadoLibre Today Could Set You Up for Life was originally published by The Motley Fool 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
an hour ago
- Yahoo
Nu Holdings CEO Velez sells 33 million shares of the company
SAO PAULO (Reuters) -Nu Holdings, which runs Brazilian digital lender Nubank, said in a statement on Monday its Chief Executive Officer David Velez sold 33 million class A shares of the company through Rua California Ltd. The sale, which was motivated exclusively for personal asset planning purposes, represents about 3.5% of Velez's shares in Nu Holdings, and 0.7% of the total of shares issued by the company, the statement added. Sign in to access your portfolio
