Markets

Why StoneCo Stock Fell 14.1% Last Month

What happened

Shares of StoneCo (NASDAQ: STNE) dipped 14.1% in August, according to data from S&P Global Market Intelligence. The Brazilian payment processing stock lost ground after the company published its second-quarter earnings results on Aug. 14.

STNE Chart

STNE data by YCharts

The company managed to grow second-quarter revenue 68.8% year over year to hit sales of 586.2 million Brazilian real (roughly $145 million), but this performance fell short of the average analyst target of 613.28 million real. Non-GAAP (adjusted) net income rose roughly 173% to hit 194 million Brazilian real, working out to per-share earnings of roughly $0.17 and missing the average analyst target by $0.01.

A credit card.

Image source: Getty Images.

So what

It's worth noting that Aug. 14 was a very bad day for the stock market as a whole, with the S&P 500 index falling roughly 2.9% and the Dow Jones Industrial Average falling 3.05% and posting its worst daily performance of the year. While Stone's results fell short of analyst targets, the company still posted strong sales and earnings growth in the second quarter, and its post-earnings stock performance may have been affected by unfavorable timing. 

Now what

StoneCo stock has regained a bit of ground this month, with shares advancing roughly 3% in September's trading so far.

STNE Chart

STNE data by YCharts

There's a lot of room for growth in the Brazilian and Latin American fintech markets, and management has been making moves to expand Stone's business outside the payment services space. The company appears to be having some success on that front, with the business more than doubling its software-subscriber base sequentially to hit 70,000 users last quarter. Stone also launched a financing unit in March and had supplied credit to over 3,000 clients. 

The company's total active client count rose nearly 80% year over year to hit 360,200, and the business managed to add 50,500 new clients in the quarter. If the business continues to add users to its core payment processing services while successfully ramping up its offerings and reach in other categories, there's still plenty of potential for sales and earnings growth.

Shares trade at roughly 44 times this year's expected earnings.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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