5 Cathie Wood Stocks that Can Rebound in Q4

2. StoneCo Ltd. (NASDAQ:STNE)

Number of Hedge Fund Holders: 30

Share Price Decline YTD as of August 23: 52.17%

StoneCo Ltd. (NASDAQ:STNE) provides financial technology solutions to merchants for conducting e-commerce across in-store, online, and mobile channels in Brazil. In Q2 2022, Cathie Wood’s ARK portfolio had 2.6 million StoneCo Ltd. (NASDAQ:STNE) shares worth $26.5 million. The stock has plummeted about 52% year to date as of August 23. However, the company reported growth in Q2 2022 and expects Q3 revenue and earnings to increase from Q2 levels. 

Susquehanna analyst James Friedman on August 23 said StoneCo Ltd. (NASDAQ:STNE) posted solid Q2 results as TPV growth outperformed estimates. The analyst maintained his price target but raised his TPV growth estimate from 16% to 24%. He reaffirmed his Positive rating and a $20 price target on StoneCo Ltd. (NASDAQ:STNE) shares.

According to Insider Monkey’s data, StoneCo Ltd. (NASDAQ:STNE) was part of 30 hedge fund portfolios at the end of June 2022, compared to 43 funds in the last quarter. Warren Buffett’s Berkshire Hathaway is the biggest stakeholder of the company, with roughly 10.7 million shares worth $82.3 million. 

Here is what Nordstern Capital has to say about StoneCo Ltd. (NASDAQ:STNE) in its Q2 2022 investor letter:

“‘To grow its customer base, X.com had been giving out lines of credit to prospective customers, part of its plan for a full suite of financial services products. But with X.com expanding as fast as it had, appropriate underwriting had taken a back seat.’ – Jimmy Soni, in ‘The Founders’

StoneCo Ltd. (Stone) today is seen as a payment provider with lower margins than its peers in a structurally difficult environment in Brazil: strong competition, declining take rates, increasing funding costs. The last two quarterly updates indicated improvement in all business lines for Stone and management did forecast further margin increases throughout all of 2022. In contrast to the other payment providers, Stone also has a sizable software business. In addition, Stone is working towards becoming a full-fledged financial services provider. Both endeavors add costs to the P&L, but do not yet add meaningful profits, which is about to change. Particularly the lending business could become bigger and more profitable than the current bread-and-butter payments business. However, the lending business was suspended last year after experiencing issues that resemble those of the early PayPal from more than two decades ago (“X.com” was renamed “PayPal” in 2001)…” (Click here to see the full text)