10 Best Affordable Tech Stocks to Buy According to Analysts

6) StoneCo Ltd. (NASDAQ:STNE)

Forward P/E as of 23 August: 11.67x

Upside Potential: 27.27%

Expected EPS Growth This Year: 31.5%

StoneCo Ltd. (NASDAQ:STNE) is a provider of financial technology solutions. It offers solutions that empower merchants and integrated partners to conduct electronic commerce seamlessly across in-store, online, and mobile channels in Brazil.

The company delivered 2Q 2024 financial results, marked by strong TPV growth and continued advancements in Credit and Banking. StoneCo Ltd. (NASDAQ:STNE) remains well-positioned to capture a significant share of Brazil’s growing fintech market, in which the company already holds over ~11%.

Brazil remained ahead of the curve in its inflation and rate-cut cycle. The country started increasing rates earlier and then decided to cut them substantially as inflation came under control. Therefore, the company is expected to benefit greatly from this trend.

StoneCo Ltd. (NASDAQ:STNE)’s network effect should continue to act as a tailwind. As and when the number of merchants using the company’s services increases, its appeal tends to grow for other merchants, since they need to provide consumers a convenient payment solution. This helps create a self-reinforcing network effect, which drives rapid growth in total users. Therefore, the merchants are encouraged to adopt its products.

With the expansion of its merchant base, StoneCo Ltd. (NASDAQ:STNE) will be able to increase its take rates from transactions. Thus, as its customer base grows, it should generate increased revenues from the existing clients. This is evident as the company’s MSMB (Micro and SMB clients) payments client base went up by 30% YoY in 2Q 2024, and MSMB take rate increased by 7 basis points during the same period.

JPMorgan Chase & Co. upgraded the shares of StoneCo Ltd. (NASDAQ:STNE) from a “Neutral” to an “Overweight” rating. They gave a price target of $20.00 on 6^th June.

Investment management company Ave Maria recently released its fourth quarter 2023 investor letter. Here is what the fund said:

“StoneCo Ltd. (NASDAQ:STNE) provides solutions that enable merchants and integrated partners to conduct electronic commerce seamlessly across in-store, online, and mobile channels in Brazil. StoneCo has faced near-term operational challenges because of the pandemic and high levels of inflation in Brazil. The company appears to be moving past these challenges and it appears that the successful integration of the newly acquired software business with its payments business will drive substantial shareholder value longer term.”