Latest news with #bearishthesis
Yahoo
2 days ago
- Business
- 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
30-05-2025
- Business
- Yahoo
TriplePoint Venture Growth BDC Corp. (TPVG): A Bear Case Theory
We came across a bearish thesis on TriplePoint Venture Growth BDC Corp. (TPVG) on Substack by Edwin Dorsey. In this article, we will summarize the bears' thesis on TPVG. TriplePoint Venture Growth BDC Corp. (TPVG)'s share was trading at $6.71 as of 23rd May 2025. TPVG's trailing and forward P/E were 7.22 and 5.61 respectively according to Yahoo Finance. A financial portfolio manager looking at data on a monitor while managing assets. TriplePoint Venture Growth BDC (NYSE: TPVG) has shown a consistent decline in net asset value (NAV), raising concerns about the sustainability of its business model. Since Q4 2021, NAV has dropped from $14.01 to $8.61 by Q4 2024, reflecting a significant erosion in asset quality. This ongoing trend suggests structural issues within its lending practices, particularly its continued exposure to financially unstable, venture-stage companies. While the firm has attempted to rotate out of distressed loans, the newer additions to the portfolio appear to carry similar levels of risk, offering little improvement in overall credit quality. The company remains heavily reliant on startups that are either operationally challenged or lack the financial strength to meet their obligations, making recovery rates uncertain and potentially leading to further write-downs. Despite expectations of stabilization, there has been no meaningful progress in reversing the decline in NAV or improving portfolio health. Dividend sustainability is also in question, given the weakening income profile and increasing pressure on earnings. Without clear signs of a strategic shift or a credible path to portfolio improvement, TriplePoint's long-term outlook remains concerning. The persistent deterioration in NAV, limited visibility into credit recovery, and continued exposure to weak borrowers all suggest a structurally fragile business. As a result, the stock may continue to underperform, and the risk/reward profile has become increasingly unfavorable for long-term investors. For a deeper look into another stock in the Asset Management industry, be sure to check out our article on BlackRock, Inc. (BLK), wherein we summarized a bullish thesis by Kroker Equity Research on Substack. TriplePoint Venture Growth BDC Corp. (TPVG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held TPVG at the end of the first quarter which was 9 in the previous quarter. While we acknowledge the risk and potential of TPVG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TPVG but that trades at less than 5 times its earnings, check out our report about the cheapest 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. Sign in to access your portfolio
