This title comment is based on Q1 2022 anticipated fundamentals. ANNOUNCED TODAY at the market close. Company projects for Q1 2022, 100% increase in both Revenue and Earnings (below).
StoneCo Shares Rise on Bullish 1Q Guidance
Published: March 17, 2022, at 4:59 p.m. ET – Wall Street Journal
StoneCo Ltd.’s shares rose 23% to $11.83 in after-hours trading Thursday after a bullish forecast that calls for revenue and income more than doubling in the first quarter.
The financial technology company expects revenue and income to range from 1.85 billion reais to 1.9 billion reais ($360 million to $370 million), ahead of the FactSet analyst consensus of about BRL1.7 billion.
For the fourth quarter, StoneCo reported an 87% increase to BRL1.87 billion in revenue and income but swung to a BRL801.5 million net loss as it recognized BRL764.2 million in mark-to-market losses in its investment in Banco Inter.
“Our execution challenges were exacerbated by the problems of the [Brazilian] national registry system, which we did not expect and therefore were not well-prepared for,” Chief Executive Thiago Piau said in a statement, adding that the company had paused credit operations in mid-year. “In prepayment, our focus on growth delayed re-pricing of our solutions while interest rates in Brazil were rising sharply throughout the year.”
The company ended the year at a loss of BRL1.38 billion on BRL4.82 billion in revenue and income, compared with a profit of BRL873.4 million and BRL3.32 billion in revenue and income for 2020. Write to Maria Armental at maria.armental@wsj.com
LOTM: mark-to-market losses are not actual cash loses. They are bookkeeping losses, similar to your brokerage account going up (for gains) or down (for loses) at month end. They do not denote actual cash losses.
This should also be good news for PagSeguro (PAGS)* $14.57 as well. They are in the same industry with PAGS being the large company.
LOTM: Teaching Moment or Full Disclosure
You have read a number of times that our selection of stocks starts first with a Top down approach of money flows based on Macro conditions – Geo-Political, Asset class rotation and Industry group rotation. We then look at companies within the industries we believe are receiving fund flows from our top down approach. In this phase, we shift to a bottom’s up approach and look at Capital Structure, Balance Sheet, Income Statement and Management. We then look backwards, present moment and forwards to judge company valuation, is there a catalyst and the potential for future momentum.
Once a company or companies are chosen the battle for price and share positioning begins. This is the battle ground. Everything up to this moment has been preparation for the purchase. We are almost always early. All speculators are. They see what could be before the market. Certainly, speculators are wrong a lot, perhaps more than most. The hardest element to judge is time. You are almost never right on the spot, with timing. Being wrong is in the perception of the reader or investor. Not a problem, because no one is “on time’ all the time, with timing. This is why share accumulation, positioning, and tax management is so important. Getting into the right place at the right time when the “Go Flag” goes down.
Today, might be that extraordinary day, for StoneCo and LOTM in this regard. Perhaps today was the green flag going down on our work in StoneCo and maybe even PAGS – we have a position in PagSeguro (PAGS) as well. They are both leading payment companies in Brazil. What is good for one should be good for the other. It’s a good evening to relax and enjoy a glass of wine……Tension & Stress gone for a moment. Tomorrow, it starts again. I love it!
LOTM considers both STNE and PAGS attractive to buy. We are still in an accumulation mode, increasing our position size.
LOTM Research & Consulting Service
* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
Please refer to our web site for full disclosure at www.LivingOffTheMarket.com ZTA Capital Group, Inc.
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