I’m a CEO of a Deaf access company, investor, and writer. I really like this piece, and I’m a $STNE investor myself, but the grammatical errors are blinding. This could be a great sub if the writing were clean and professional.
I edit Antonio Linares’ substack, which is focused on innovation investing. Check it out and get back to me if you’d like me to edit for you as well. Currently doing it for free. Email me at BBirnbaum@gm.SLC.edu.
I am a bit confused about your projected ebt margin. Most of their expenses are financial expenses (mainly from selling of recivables from what I remember) and that should probably lower substantially as rates normalize from what I understand?
Yea I think financial expenses make up the biggest portion or expenses, something like 40% currently which has increased because of interest rates. In the last few quarters their pretax margin has been in the 13-14% range and growing. It was impaired from mark to market losses on investments (banco inter) and higher rates and so forth. Before the pandemic it was way higher, something like 30-40%. I’m interested to see if they can roll out their credit solutions successfully, it could have a huge positive impact on margins if they do.
I agree. If I remember correctly in the earning call they said they wont lower the prices as expenses lower so in my valuation (bull case) I have 30% margin in a year or so. The only worry I have is that they will not adapt quickly enough and lose market share or growth but I don't deem it likely
Thus, I think the valuation at 13-18% margin is probably a tad too conservative but it's remains to be seen how things evolve.
I think people are underestimating the macro tailwinds (dollar trend reversal and Brazil rate cuts). If this company keep executing this is easily a multibagger in my book
Agreed, and yea the margin assumption may be a bit too conservative and my valuation may be on the lower side. If the Brazilian selec rate comes down and their financial expenses shrink we could see much higher margins.
My only worry is Stone having strong competition from NU bank and Mercado Libre. Mercado Libre is pushing slowly into Brazil’s credit market with strong double digit growth.
I bit the bullet on MELI. It was a little overpriced, but I was willing to pay for its growth even with a small drawback. They’re expanding quickly into the 3 biggest markets in Latin America
Yea good question, it’s possible, 71% of the population already uses PIX. but from what I read stone already enabled PIX as a feature on stones POS terminals. I’ll try to dig a bit deeper to so what I can uncover.
Good research! What do you think about the rise of Pix payments (https://www.ft.com/content/e1c7b0e7-4c17-40c4-8e03-16c698674efa) ? Wouldn't the rise of free government payment services capture the market share of private payment platform like Stone?
I’m a CEO of a Deaf access company, investor, and writer. I really like this piece, and I’m a $STNE investor myself, but the grammatical errors are blinding. This could be a great sub if the writing were clean and professional.
I edit Antonio Linares’ substack, which is focused on innovation investing. Check it out and get back to me if you’d like me to edit for you as well. Currently doing it for free. Email me at BBirnbaum@gm.SLC.edu.
https://substack.com/@antonio
Yikes! Hey thank for the feedback. I’m not the greatest writer but I’m learning. I’ll check it out and let you know. Thank you.
loved the article!
I am a bit confused about your projected ebt margin. Most of their expenses are financial expenses (mainly from selling of recivables from what I remember) and that should probably lower substantially as rates normalize from what I understand?
Yea I think financial expenses make up the biggest portion or expenses, something like 40% currently which has increased because of interest rates. In the last few quarters their pretax margin has been in the 13-14% range and growing. It was impaired from mark to market losses on investments (banco inter) and higher rates and so forth. Before the pandemic it was way higher, something like 30-40%. I’m interested to see if they can roll out their credit solutions successfully, it could have a huge positive impact on margins if they do.
I agree. If I remember correctly in the earning call they said they wont lower the prices as expenses lower so in my valuation (bull case) I have 30% margin in a year or so. The only worry I have is that they will not adapt quickly enough and lose market share or growth but I don't deem it likely
Thus, I think the valuation at 13-18% margin is probably a tad too conservative but it's remains to be seen how things evolve.
I think people are underestimating the macro tailwinds (dollar trend reversal and Brazil rate cuts). If this company keep executing this is easily a multibagger in my book
Anyway, great work! Love your writings
Agreed, and yea the margin assumption may be a bit too conservative and my valuation may be on the lower side. If the Brazilian selec rate comes down and their financial expenses shrink we could see much higher margins.
Well done! Great analysis!
Thank you! Glad you liked it!
My only worry is Stone having strong competition from NU bank and Mercado Libre. Mercado Libre is pushing slowly into Brazil’s credit market with strong double digit growth.
I agree, NU and MELI are formidable competitors. I bought $NU during the sell off. I’d love to own $MELI but it’s just too expensive.
I bit the bullet on MELI. It was a little overpriced, but I was willing to pay for its growth even with a small drawback. They’re expanding quickly into the 3 biggest markets in Latin America
Yea good question, it’s possible, 71% of the population already uses PIX. but from what I read stone already enabled PIX as a feature on stones POS terminals. I’ll try to dig a bit deeper to so what I can uncover.
https://labsnews.com/en/articles/business/stone-doesnt-fear-pix/