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StoneCo STNE shares have plunged 55.2% over the past year against the Zacks Internet - Software industry’s growth of 31.3% and the broader Zacks Computer & Technology sector’s return of 30.6%.
The company has underperformed its industry peers, including Five9 FIVE, Innovid CTV and Smartsheet SMAR, over the same time frame.
While Five9 has lost 46% over the past year, CTV and Smartsheet have rallied 114.1% and 17.4%, respectively.
The underperformance can be attributed to increased competition from banks moving down market to serve Small and Medium Enterprises.
One Year Performance
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However, STNE is benefiting from continued momentum in its primary sectors, notably within the financial services and an expanding credit portfolio.
STNE Benefits From Robust Growth in the MSMB Segment
StoneCo’s robust solutions in the financial services segment, particularly its Micro, Small and Medium-sized Businesses (MSMB) offerings, continue to be a major growth driver for its success.
STNE’s MSMB segment saw 20% year-over-year growth in total payment volume, reaching BRL 114 billion in the third quarter of 2024. This performance was attributed to strong demand in Brazil’s small business sector where the need for digital payment solutions has been rising rapidly.
As a result of this demand, the number of active MSMB clients grew 21% year over year, totaling nearly four million clients. This growth was driven by increased engagement from businesses using StoneCo’s payments and banking solutions.
The MSMB take rate reached an all-time high of 2.58% for the quarter, surpassing the annual guidance of 2.49%, due to a stable competitive environment, improved client engagement and a focus on healthy unit economics.
The adoption of PIX QR codes in the third quarter of 2024 grew significantly, with volumes increasing by a factor of 2.4x compared to the same quarter last year. The success of PIX, a Brazilian instant payment system, reflects the growing trend of digital payments and the shift toward more efficient, real-time payment methods.
STNE Benefits From Credit Portfolio Expansion
StoneCo’s credit portfolio is another area of impressive growth. The credit portfolio grew nearly 30% quarter over quarter, reaching BRL 923 million.
The company highlighted that non-performing loan levels remained within its internal risk appetite, indicating effective credit risk management and a strong credit portfolio.
STNE continued to focus on merchant solutions, which made up the majority of the credit portfolio. In the third quarter of 2024, STNE launched Giro Facil, a revolving credit facility, and enhanced its credit card offerings, particularly for micro-clients, driving growth in the credit segment.