Scotiabank Sees Sharp Upside In StoneCo

Analysts have different takes on StoneCo Ltd STNE, a financial technology solutions provider.
Scotiabank analyst Jason Mollin initiated coverage with a Sector Perform rating and a $22 price target, implying a 30% upside.
Mollin rolled out coverage on a trio of Brazilian payments and fintech players, which he noted together represent about 50% of the Brazilian acquiring market's total payment volume or TPV.
He sees Stone starting to recover from lending issues and benefiting from Linx integration next year.
His "conservative" full-year 2021 earnings estimate is more than 50% below consensus to incorporate a loss from issues managing credit collateral and stopping loan originations in Q3, as well as cost pressure from investments and higher funding costs.
Grupo Santander analyst Henrique Navarro downgraded to Underweight from Hold with a price target of $17, down from $45, citing his cautious view on the acquiring sector.
He sees no visibility on Stone's ability to extract value beyond acquiring and also points to economic trends affecting the acquiring industry that are "disappointing."
While acquirers' total payments volume may be "a way to play inflation," if there is a recession, "inflation alone can do nothing."
Price Action: STNE shares traded higher by 8.33% at $16.9 on the last check Wednesday.

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