10 Worst-Performing Growth Stocks in 2024

8. StoneCo Ltd. (NASDAQ:STNE)

Year to Date Gain as of October 28: -35.14%

Number of Hedge Fund Holders: 35

StoneCo Ltd. (NASDAQ:STNE) is a tech company that provides financial technology and software. They help merchants and partners do electronic commerce both in stores and online. While it was expected to be one of the best performing amid the digital revolution with increased focus on electronic payments, that has not been the case. The stock is down by 35.14% year to date, emerging as one of the worst-performing growth stocks in 2024.

StoneCo Ltd. (NASDAQ:STNE) is down by more than 80% from its all-time highs. The underperformance in recent months has come from the company’s core business, offering financial services to small and medium-sized businesses under pressure. Its growth hit a wall in the Brazilian economy, and it felt pressure from the high interest rates environment and slower recovery from the pandemic era.

StoneCo Ltd. (NASDAQ:STNE)’s issue was made worse by the fact that it used data from Brazil’s national registry to assess borrowers’ creditworthiness, only to find out later that the data was inaccurate. As a result, the fintech stock price fell more than 90%, its net income suffered greatly, and it suffered enormous losses on its loan portfolio.

Amid the struggles, StoneCo’s core strength lies in its Merchant Services Micro Business, which continues to outperform the overall industry. Consequently, its Total Payment Volume has grown at double the industry rate from $25.9 billion as of 2019 to $61 billion, representing a 28% compound annual growth rate. Likewise, it has grown its client base by 37%, from a net loss of $92 million in 2022 to a profit of $280 million in 2023. Its net income was up by 54.4% in Q2 to R$497.1 million

With an emphasis on improving credit offerings, growing software solutions, and extending payment processing capabilities, StoneCo Ltd. (NASDAQ:STNE) is pursuing a multifaceted growth strategy that affirms its long-term prospects.

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.”