{
  "@context": "https://frontierpicks.com/schemas/dossier.v1.json",
  "ticker": "STNE",
  "name": "StoneCo Ltd. Class A",
  "url": "https://frontierpicks.com/dossiers/STNE/",
  "json_url": "https://frontierpicks.com/dossiers/STNE.json",
  "status": "DORMANT",
  "current_conviction": "LOW",
  "archetype": {
    "code": "a5",
    "n": 5
  },
  "current_thesis": "StoneCo's shares have rallied on Brazil's election rather than on earnings, while credit losses rise and 2026 guidance sits at its low end. The 25 October 2026 runoff and the 12 November 2026 third-quarter report decide whether the gain holds.",
  "invalidation_trigger": "A daily close below $10.00, which would reverse most of the rally that followed the 2026-10-05 first-round result. A Lula runoff win, or an over-90-day NPL ratio above 8.60% in the 2026-11-12 report, would also break the case.",
  "catalyst_date": "2026-10-25",
  "pick": null,
  "themes": [
    "emerging-markets",
    "fintech-consumer-credit"
  ],
  "tags": [],
  "sources": [],
  "notes": [
    "StoneCo is a foreign private issuer: quarterly results are filed on Form 6-K rather than 10-Q, and figures are reported in Brazilian reais.",
    "Adjusted price history reflects the US$2.53 per share extraordinary dividend paid on 2026-05-04, so pre-May levels differ from prices quoted at the time."
  ],
  "body_markdown": "## Current Thesis\n\nStoneCo's shares have climbed on Brazil's election rather than on earnings. Credit losses are rising and management is steering 2026 results to the low end of guidance, so the case for beating the S&P 500 rests on two dates: the 2026-10-25 presidential runoff and the 2026-11-12 third-quarter report.\n\nThe shares closed at $11.28 on 2026-10-16. That is 29.6% below the 52-week high of $16.02 on split- and dividend-adjusted daily closes, and only 0.2% above the level of three months earlier. The rally after the first round did little more than repair the losses that followed the 2026-08-13 second-quarter report. In that report, revenue rose 2.5% year on year and adjusted net income fell 2.6%.\n\nThe narrative is accelerating. Fresh political news since the 2026-10-04 first round has pulled new money into Brazilian stocks. Benzinga reported on 2026-10-05 that the iShares MSCI Brazil ETF jumped 13%, its best day since 2020. In this view the move is a bet on Brazilian interest rates, and StoneCo's business has not confirmed it yet. The view is wrong if the third-quarter report shows the over-90-day non-performing loan (NPL) ratio falling from 8.60% while results track above the bottom of guidance.\n\n## Bull Case\n\n- **Lower interest rates lift earnings directly.** On the 2026-08-13 call, management put the pretax impact of each 100-basis-point move in Brazil's Selic policy rate at roughly R$200–250 million. Markets read a Flávio Bolsonaro win as more fiscally restrictive, which would leave room for lower rates.\n- **The share count is shrinking quickly.** StoneCo bought back R$3.0 billion of stock in the twelve months to 2026-06-30, retiring 40.3 million shares. Second-quarter adjusted basic earnings per share (EPS) still rose 8.6% to R$2.40 even though adjusted net income fell, according to the company's 6-K.\n- **Payment volume growth picked up.** Total payment volume (TPV) grew 4.3% year on year to R$142.2 billion in the second quarter, up from 2.7% growth in the first quarter (6-K, 2026-08-13).\n- **Deposit funding is growing.** Retail deposits reached R$10.8 billion at the end of the second quarter, up 22.3% year on year and 7.0% on the quarter (6-K, 2026-08-13).\n- **Newer loan cohorts are performing better.** Management said on 2026-08-13 that first-payment defaults on the automated lending desk were falling and that the June cohort was the best in 12 months.\n\n## Bear Case\n\n- **Loan losses are rising fast.** The over-90-day NPL ratio rose to 8.60% in the second quarter from 6.98% in the first. The 15-to-90-day ratio rose to 6.00% from 4.97%. Meanwhile the credit portfolio more than doubled, up 107.5% year on year to R$3.75 billion (6-K, 2026-08-13).\n- **Guidance points to the low end.** Management kept its 2026 ranges of R$6.6–7.0 billion adjusted gross profit and R$10.80–11.40 adjusted basic EPS, but now expects the bottom of both. The ranges assumed a 12.5% Selic at year-end; management now expects roughly 14% (2026-08-13 call).\n- **The card-issuer exposure is not resolved.** StoneCo booked a non-recurring R$200.3 million allowance in the second quarter for card issuers in distress. Management said further provisions may be needed if litigation scenarios develop.\n- **Core growth is thin.** Second-quarter revenue was R$3.59 billion, up 2.5% year on year and 0.3% on the quarter (6-K, 2026-08-13).\n- **The runoff is a two-way event.** Bloomberg reported on 2026-10-09 that Bolsonaro leads Lula in runoff polling. That lead is already in the price, so a Lula win would remove the main reason for the October rally.\n\n## Setup & Price Structure\n\nThe shares closed at $11.28 on 2026-10-16, 29.6% below the adjusted 52-week high of $16.02. The 14-day relative strength index (RSI) stood at 71.9, above the 70 level usually read as overbought after a fast advance.\n\nThe move was compressed into one session. Benzinga reported StoneCo up 16.33% at $11.11 in pre-market trading on 2026-10-05, the first session after the first-round result. MarketBeat recorded a close of $11.35 on 2026-08-03, so the shares are back to roughly where they traded before the second-quarter report.\n\nAs of 2026-08-03, MarketBeat showed a consensus Hold rating from 10 analysts, with an average 12-month target of $14.59 (high $19, low $11). No target changes since the election have been confirmed. A move back toward $10 would give back most of the election gain and leave the shares near their post-report lows.\n\n## Catalyst Calendar (next 30 days)\n\n- **2026-10-25, Brazil presidential runoff.** Flávio Bolsonaro faces President Lula after finishing ahead in the 2026-10-04 first round (Benzinga, 2026-10-05). A Bolsonaro win would confirm the rate thesis behind the rally. A Lula win would likely reverse it, along with moves in the wider Brazil group.\n- **2026-10-28, quiet period begins.** StoneCo said on 2026-10-08 that its pre-earnings quiet period starts on this date, so no management commentary is expected until the report.\n- The report shows whether NPLs have peaked and whether the year is still tracking at the low end of guidance.\n\n## What Would Change Our Mind\n\nA Lula victory on 2026-10-25 would break the rate-driven case. So would a third-quarter report on 2026-11-12 showing the over-90-day NPL ratio above the second quarter's 8.60%, more card-issuer provisions, or a cut to the 2026 ranges. A daily close below $10.00 would show the market has already priced one of these outcomes.\n\nThe read would turn more positive if the report shows NPLs falling, cost of risk moving toward the high teens that management targeted for year-end, and adjusted EPS tracking above the R$10.80 floor. A clearer path to rate cuts after the runoff would also help.\n\n## Correlation Notes\n\nStoneCo trades as a high-beta proxy for Brazilian risk. On 2026-10-05 it moved alongside XP, which Benzinga reported up 17.2% at $25.20 pre-market, and the iShares MSCI Brazil ETF, up 13%. Peers in the same Emerging markets group include Inter & Co (INTR) and Sabesp (SBS). The group has been heating up again since early August, and that strength drove StoneCo's October gain more than anything company-specific.\n\nA reversal in the Brazil ETF after the runoff would likely pull StoneCo down with it. Its rate sensitivity also links it to Brazilian fintech lenders more than to US payment processors.",
  "first_seen": "2026-10-16",
  "last_analyzed": "2026-10-17T07:02:23+00:00",
  "last_synthesized": "2026-10-17",
  "last_update_source": "watchlist_research",
  "license": "Content © FrontierPicks. Cite the canonical URL."
}