7 Cheap Technology Stocks To Buy Right Now

2. StoneCo Ltd. (NASDAQ:STNE)

Forward Price-to-Earnings Ratio: 7.62

Average Upside Potential: 64.08%

Number of Hedge Fund Holders: 25

StoneCo Ltd. (NASDAQ:STNE) provides financial technology solutions through an end-to-end cloud-based technology platform to conduct electronic commerce across in-store, online, and mobile channels in Brazil. Offerings include payment processing, point-of-sale systems, credit card acquiring, and business loans.

The company differentiates itself with superior client service, tech-enabled distribution, and a comprehensive merchant platform. In financial services, revenue is increasing while maintaining stable margins, and the software business also remains consistently profitable.

Overall, the company generated a revenue of $586.23 million in Q2 2024. However, this was a drop of 1.06% year-over-year. The biggest challenge has been the growth of PIX QR Code payments, which has impacted the card payment volume, with more transactions occurring through PIX QR Code and fewer using cards. While this is positive for the business, TPV growth is lower than expected consequently.

Still, there was robust TPV growth and progress in Credit and Banking. The company remains well-positioned to capture a substantial portion of Brazil’s growing fintech market, where it currently holds a market share of approximately 11%. Vertical software revenue grew 3% year-over-year due to an increase in recurring revenue growth offset by a decrease in non-recurring revenues in priority verticals.

It continues to gain market share in the micro and small business (MSMB) market. Financial services revenue increased 10.6% due to active client growth and higher monetization. In the second quarter alone, the company’s MSMB payments client base grew by 30% year-over-year, and the MSMB take rate increased by 7 basis points.

Based on the strong trajectory of results demonstrated through the year’s first half, StoneCo Ltd. (NASDAQ:STNE) is set to achieve its long-term goals.

Ave Maria World Equity Fund stated the following regarding StoneCo Ltd. (NASDAQ:STNE) in its fourth quarter 2023 investor letter:

“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.”