Forecast: Analysts Think StoneCo Ltd.'s (NASDAQ:STNE) Business Prospects Have Improved Drastically
StoneCo Ltd. (NASDAQ:STNE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year’s statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance.
Following the upgrade, the most recent consensus for StoneCo from its ten analysts is for revenues of US$4.7b in 2021 which, if met, would be a huge 280% increase on its sales over the past 12 months. Statutory earnings per share are presumed to soar 97% to US$5.26. Prior to this update, the analysts had been forecasting revenues of US$4.2b and earnings per share (EPS) of US$4.71 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
View our latest analysis for StoneCo
It will come as no surprise to learn that the analysts have increased their price target for StoneCo 13% to R$303 on the back of these upgrades. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values StoneCo at R$80.54 per share, while the most bearish prices it at R$30.41. This is a very narrow spread of estimates, implying either that StoneCo is an easy company to value, or – more likely – the analysts are relying heavily on some key assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting StoneCo’s growth to accelerate, with the forecast 280% growth ranking favourably alongside historical growth of 33% per annum over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 13% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect StoneCo to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at StoneCo.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for StoneCo going out to 2024, and you can see them free on our platform here..
We also provide an overview of the StoneCo Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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