StoneCo Ltd. (NASDAQ: $STNE) is a financial services company that provides fintech such as POS, ERP, omnichannel, e-commerce, and engagement solutions in Brazil.
Headquartered in Rio de Janeiro, the company’s fintech solutions help to drive growth for over 1.8 million active clients spanning various industries.
On March 18, 2024, StoneCo reported stellar financial results for the fourth quarter and full fiscal year 2023, showcasing its robust growth trajectory and operational excellence.
Q4 Financial Performance Highlights
In the fourth quarter, the company’s total revenue and income surged by an impressive 20.1% year-over-year, reaching a staggering R$3.2 billion. This remarkable growth was primarily driven by a substantial 24.4% increase in financial services platform revenues, fueled by an expanding active client base and higher monetization from existing clients. However, it came in below the expected R$3.42 billion.
The company’s adjusted EBITDA soared to R$1.62 billion, reflecting a remarkable 31.5% Y/Y increase and a 1.8% Q/Q rise. The company maintained strong profitability despite a slight sequential dip in the adjusted EBITDA margin from 50.7% to 49.8%, primarily due to higher labour contingencies and seasonally elevated administrative expenses.
Soaring Earnings and Robust Cash Position
StoneCo adjusted EBT skyrocketed by a staggering 131.6% Y/Y, reaching R$638.2 million in the fourth quarter of 2023. Additionally, the adjusted EBT margin expanded by an impressive 2.3 percentage points sequentially to 19.6%, primarily driven by consolidated revenue growth and lower financial expenses.
The company’s adjusted net income also witnessed a remarkable surge, soaring by a whopping 176.6% year over year to R$563.8 million. Consequently, the adjusted net margin climbed to an impressive 17.4%, up from 13.9% in the previous quarter.
StoneCo’s basic EPS in Q4 2023 reached R$2.10, a significant increase from R$0.25 in the prior year. Furthermore, the adjusted diluted EPS stood at R$1.76 per share, compared to R$0.63 per share in Q4 2022, and above estimates of R$1.43. Adjusted net cash position stood at a staggering R$5,053.3 million in the fourth quarter of 2023, representing a substantial 44.8% Y/Y increase and a 4.0% Q/Q rise.
StoneCo’s Full-Year 2023 Financial Highlights
StoneCo reported remarkable financial milestones in FY23, with total revenue and income surging to R$12.05 billion, a 25.7% increase from the previous year’s figure of R$9.59 billion.
Adjusted EBITDA also experienced a notable rise, reaching R$5.96 billion in 2023, up from R$4.17 billion in 2022, reflecting a robust 42.9% year-over-year growth. The adjusted EBITDA margin expanded to an impressive 49.4%, up by 5.9 percentage points from 43.5% in 2022.
Furthermore, adjusted EBT witnessed a remarkable increase, soaring to R$1,954.0 million in 2023 from R$586.6 million in 2022, representing a substantial growth of 233.1%. The adjusted EBT margin also improved significantly, climbing to 16.2% in 2023 from 6.1% in 2022, reflecting a noteworthy increase of 10.1 percentage points.
Adjusted net income also witnessed a substantial surge, reaching R$1,557.5 million in 2023, up from R$410.5 million in 2022, representing a remarkable growth of 279.4%. Adjusted net cash also saw a notable increase, climbing to $5.0 billion in 2023 from $3.5 billion in 2022, marking a solid 44.8% growth. The company’s basic EPS was R$5.09 per share in 2023, and its adjusted diluted EPS was R$4.85.
Driving Growth Across Key Segments
StoneCo’s impressive performance was fueled by robust growth across its key segments. Financial services revenue reached an impressive R$2.87 billion in Q4 of 2023, representing a 24.4% Y/Y increase. The company’s banking platform also witnessed remarkable growth, with deposits reaching R$6.1 billion in Q4, reflecting a 52.1% Y/Y increase.
The company also made significant strides in its credit solution, with a portfolio of R$309 million, highlighting the effectiveness of its risk management practices.
Additionally, the company introduced a new metric to measure payment volume among customers who have adopted integrated solutions in key software sectors like retail, gas stations, food, and pharmacies. This metric witnessed a remarkable 19% increase compared to the third quarter, nearly twice the quarterly evolution of MSMB’s TPV.
Solid Software Performance and Strategic Outlook
StoneCo’s software segment also delivered a solid performance. The company’s adjusted software EBITDA reached R$58.7 million in Q4 of 2023, with a margin of 16.2%, a decline from the previous year’s margin of 15.8%, driven by restructuring costs, which are expected to yield benefits in 2024.
The company expects Adjusted Net Income to exceed 1.9 R$bn in 2024, with a growth rate of over 22% from the previous year. By 2027, it aims to surpass 4.3 R$bn in net income. Adjusted Administrative Expenses are anticipated to remain below 1.125 R$bn in 2024, a 7% year-over-year increase.
Commenting on the company’s performance and strategic outlook, Pedro Zinner, CEO of StoneCo, stated, “Last year brought strategic achievements and advancements in line with our goals to 2027. Our strategy is clear: integrate software business across four main sectors, build a huge technological platform, harness the potential of payment matching, banking, credit and software.”
Ambitious Growth Targets and Board Changes
Looking ahead, StoneCo has set ambitious growth targets for the coming years. The company anticipates its MSMB TPV to exceed R$412 billion in 2024, reflecting a robust Y/Y increase of over 18%. This growth trajectory is expected to continue over the long term, with a targetedCAGR surpassing 13%, aiming to reach a TPV exceeding R$600 billion by 2027.
The company also projects substantial growth in client deposits, with expectations to surpass R$7.0 billion in 2024, representing a growth rate exceeding 14% compared to the previous year. Over the period spanning 2024 to 2027, StoneCo aims to maintain this growth momentum, targeting a CAGR exceeding 26% to surpass R$14.0 billion in client deposits.
Additionally, the company’s credit portfolio is set to experience significant development in 2024, with projections indicating growth to over R$0.8 billion, marking an increase of over 2.6 times compared to the previous year. Looking forward to 2024 to 2027, StoneCo aims to achieve a robust CAGR of 90%, reaching a portfolio size exceeding R$5.5 billion.
The company expects the MSMB take rate to surpass 2.49% in 2024, reflecting a Y/Y increase of over 4 basis points. This upward trend is projected to continue, with a further increase anticipated to exceed 2.70% by 2027.
The company also announced changes to its Board of Directors. The company’s founder, André Street, has decided to end his term on the Board of Directors, not seeking reelection. Mauricio Luchetti and Gilberto Caldart will be nominated for the positions of Chairman and Vice-Chairman, respectively. In contrast, José Alexandre Scheinkman will be nominated as a new member, subject to shareholder approval.
StoneCo (STNE) Stock Performance
StoneCo Ltd. (STNE) is trading at $16.06 as of 09:56 AM EDT, marking a decrease of 8.07% from the previous close of $17.47. With a market capitalization of $5.057 billion, StoneCo has shown a significant 52-week change of 82.55%. In contrast, the S&P500 52-week change stands at 28.64%.
The stock’s 52-week high is $19.46, while its low is $8.63. The average volume over the last three months is 4.78 million shares. StoneCo’s trailing price-to-earnings (P/E) ratio is 27.79, and its forward P/E ratio is 12.71. Additionally, the 50-day moving average is $17.25.
Is StoneCo Stock a Smart Investment?
StoneCo’s exceptional fourth-quarter and fiscal year 2023 results have solidified its position as a formidable force in the financial services industry. With soaring revenues, impressive profitability metrics, and an unwavering commitment to innovation and growth, the company has set the stage for continued success.
As StoneCo forges ahead with its ambitious goals and strategic initiatives, it is poised to create unprecedented value for its shareholders and cement its status as a leader in the dynamic fintech landscape. Based on the company’s stellar performance and promising outlook, STNE stock emerges as a compelling buy for investors seeking exposure to a rapidly growing and innovative financial services powerhouse.
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