StoneCo shares fall on weak earnings, outlook

StoneCo Ltd. shares declined on Tuesday after the Brazilian digital payments company reported a quarterly loss and lowered its full-year revenue guidance, extending a recent downturn in the fintech sector.

The company posted a net loss of $19.3 million for the second quarter, compared with a profit of $10.1 million in the same period last year. Revenue fell 11% year-over-year to $502.4 million, missing analyst estimates of $520 million, according to Refinitiv data.

StoneCo also revised its 2024 revenue forecast to a range of $2.05 billion to $2.15 billion, down from its prior guidance of $2.2 billion to $2.3 billion. The company cited weaker-than-expected economic activity in Brazil, including reduced consumer spending and lower transaction volumes, as key factors behind the downward adjustment.

Analysts at BTG Pactual downgraded the stock to Hold from Buy, citing concerns over near-term profitability and macroeconomic headwinds. The brokerage trimmed its price target to $12 from $18, reflecting a potential 20% downside from current levels.

StoneCo’s shares fell as much as 12% in premarket trading, extending losses from Monday’s 8% decline. The stock has shed nearly 30% over the past month, underperforming broader Brazilian equity benchmarks.

The company’s troubles come amid a broader pullback in Latin American fintech stocks, which have faced pressure from rising interest rates and regulatory scrutiny. StoneCo, which operates in Brazil’s competitive digital payments market, has also grappled with higher customer acquisition costs and increased competition from local and international rivals.

Investors will be watching for updates on StoneCo’s cost-cutting initiatives and efforts to stabilize transaction volumes in the coming quarters as the company navigates a challenging operating environment.