Key Takeaways
- StoneCo fell 29% today, along with PagSeguro 25%, Inter & Co 36, XP 50%, and Nu Holdings 21%, after Lula unexpectedly won Brazil’s presidential runoff on Sunday with 51.8% of the vote.
- The smaller fintech and payments names fell much harder than Brazil’s largest bank, Itaú Unibanco.
- From fiscal 2022 to fiscal 2025, StoneCo’s total debt more than tripled. It is now about three times its cash, which leaves it more exposed if rates stay high.
- Before today, StoneCo traded at 5.2x forward earnings, against a five-year average of 15.3x. Investors will watch Lula’s spending, the Banco Central’s rates and relations with Washington.
StoneCo (STNE) stock sank 29% today, and it had plenty of company. XP (XP) fell a whopping 50% and PagSeguro Digital (PAGS) dropped 25% after President Luiz Inácio Lula da Silva won Brazil’s presidential runoff on Sunday.
Digital banks went down with them: Inter & Co (INTR) fell 36% and Nu Holdings (NU) 21%.
A result the market didn’t see coming
Lula took 51.8% of the vote to Flávio Bolsonaro’s 48.2%, after losing the first round earlier this month. No Brazilian presidential candidate had ever lost the first round and then won the runoff.
Investors had positioned for a Bolsonaro win, and the iShares MSCI Brazil ETF fell 25% before the open.
Washington is part of the worry. President Trump put 25% tariffs on some Brazilian goods in July, and Secretary of State Marco Rubio has said Lula’s “economic policies are bad for Americans and bad for Brazilians.”
TIKR tracks 17 analysts on StoneCo. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on StoneCo, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See StoneCo’s Analyst Ratings
Debt makes it worse
My read: investors expect a weaker real and higher rates for longer. Lula’s runoff push included expanded welfare benefits and a bigger government debt-relief program, and more spending tends to keep Brazil’s rates high. That hurts companies that lean on borrowed money most.
StoneCo is one of them. Its total debt has more than tripled from fiscal 2022 to fiscal 2025, and it now runs about three times its cash and short-term investments…
Cheap before today, cheaper now
StoneCo was already priced for trouble. It ended last week at 5.2x forward earnings, against a five-year average of 15.3x…
Today’s drop takes it closer to 3x, below the 4.1x low it hit in August.
My take: the market is right to hit StoneCo harder than the big banks, since its debt load leaves it more exposed if rates stay high. But at closer to 3x forward earnings, a lot of bad news is already in the price.
Of course, that multiple rests on estimates made before Sunday, and if analysts cut them, StoneCo isn’t as cheap as it looks. The things to watch are how Lula spends with a right-wing congress, where the Banco Central takes rates, and whether ties with Washington get worse.
So what is StoneCo stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
