Core Viewpoint - Investors in the Internet - Software sector should consider StoneCo Ltd. (STNE) and Informatica Inc. (INFA) for potential value opportunities, with STNE currently showing stronger performance metrics [1]. Valuation Metrics - STNE has a forward P/E ratio of 9.37, significantly lower than INFA's forward P/E of 20.91 [5]. - The PEG ratio for STNE is 0.36, indicating a more favorable valuation compared to INFA's PEG ratio of 2.75 [5]. - STNE's P/B ratio stands at 1.96, while INFA has a P/B ratio of 3.20, further highlighting STNE's relative undervaluation [6]. Analyst Outlook - STNE holds a Zacks Rank of 1 (Strong Buy), indicating a positive earnings estimate revision activity, while INFA has a Zacks Rank of 3 (Hold) [3]. - The stronger estimate revision activity for STNE suggests a more favorable analyst outlook compared to INFA [7]. Value Grades - STNE has a Value grade of B, whereas INFA has a Value grade of D, reflecting the overall assessment of their valuation metrics [6].

Core Insights - StoneCo (NASDAQ: STNE) has experienced a significant rebound in the first five months of the year, primarily driven by the strong performance of Brazilian equities and earnings that exceeded market expectations [1] Company Performance - The company's earnings have aligned well with market expectations, contributing to its positive performance [1] Market Context - The overall strong performance of Brazilian equities has supported StoneCo's rebound, indicating a favorable market environment for the company [1]

Core Insights - StoneCo and Block are highlighted as leading fintech companies in 2025, focusing on integrated payment and financial services for small- and medium-sized merchants [1] StoneCo Performance - StoneCo reported a strong first quarter in 2025, with adjusted earnings exceeding the Zacks Consensus Estimate by 6.3% and a year-over-year improvement of 17.2% [2] - The company achieved a 19% increase in gross profit, driven by effective repricing and lower average funding spreads, showcasing a disciplined approach to profitability [2] - Year-to-date, StoneCo shares surged 67.3%, significantly outperforming the Internet-Software industry's 14.7% gain and the S&P 500's 0.8% rise [5] - StoneCo's first-quarter revenue growth was 19% year-over-year, with Financial Services revenues up 20% and Software revenue rising 11% [8] - Adjusted EPS increased by 17.2%, with basic EPS surging 36% year-over-year, supported by disciplined cost control and margin expansion [9] - The company has returned approximately R$1 billion year-to-date through aggressive share repurchases, with a total of R$2.4 billion in buybacks over the past 12 months [10] Block Performance - Block reported a 28% increase in adjusted operating income and a 15% rise in adjusted EBITDA in the first quarter of 2025 [3] - The Square segment saw a 9% increase in gross profit, supported by gross payment volume growth of 8.2% on a constant currency basis [11] - Block generated $1.53 billion in adjusted free cash flow over the trailing 12 months, up from $1.07 billion a year ago, and repurchased $600 million in stock through April 2025 [15] - Cash App is focusing on user growth and expanding its network, with plans to scale Cash App Borrow after receiving FDIC approval [12] Valuation Comparison - StoneCo is trading at a forward 12-month P/E ratio of 8.75, while Block's forward earnings multiple is at 19.79, both appearing undervalued compared to the industry's forward P/E of 37.59 [17] - StoneCo is considered a more compelling investment opportunity compared to Block, which has mixed investor sentiment due to Cash App's near-term softness and premium valuation [19][20]

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on StoneCo Ltd. (STNE), and emphasizes the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank for making informed investment decisions [1][5][10]. Group 1: Brokerage Recommendations - StoneCo currently has an average brokerage recommendation (ABR) of 1.67, indicating a consensus between Strong Buy and Buy, based on recommendations from nine brokerage firms [2]. - Out of the nine recommendations, seven are classified as Strong Buy, which accounts for 77.8% of all recommendations [2]. - Despite the favorable ABR, the article cautions against making investment decisions solely based on this metric due to the historical ineffectiveness of brokerage recommendations in predicting stock price increases [5][10]. Group 2: Zacks Rank vs. ABR - The Zacks Rank is presented as a more reliable indicator of a stock's near-term price performance, driven by earnings estimate revisions, and is classified into five groups from Strong Buy to Strong Sell [8][11]. - Unlike the ABR, which is based solely on brokerage recommendations and may not be up-to-date, the Zacks Rank reflects timely changes in earnings estimates, making it a more effective tool for predicting future price movements [9][12]. - The Zacks Consensus Estimate for StoneCo has increased by 13.2% over the past month, indicating growing optimism among analysts regarding the company's earnings prospects [13]. Group 3: Investment Implications - The recent increase in the consensus estimate and other related factors have resulted in a Zacks Rank of 1 (Strong Buy) for StoneCo, suggesting a strong potential for stock appreciation [14]. - The Buy-equivalent ABR for StoneCo may serve as a useful guide for investors when combined with the Zacks Rank [14].

Core Viewpoint - StoneCo Ltd. has experienced a significant share price increase of approximately 68.5% year to date, outperforming the broader Internet-Software industry and the S&P 500 benchmark, which saw gains of about 7.3% and 1.2%, respectively [1][4]. Financial Performance - The company has achieved three consecutive quarters of earnings beats, with the latest adjusted earnings per share reported at 34 cents, exceeding the Zacks Consensus Estimate by 6.3% [1][3]. - Financial Services revenues grew by 20% year over year in the first quarter of 2025, up from 11% in the previous quarter, indicating a positive trend in profitability [7]. - The Software segment contributed to profitability with an 11% revenue growth, driven by higher recurring subscriptions and an expanding client base, leading to a 12% increase in adjusted EBITDA [8]. Strategic Initiatives - StoneCo's strategic repricing initiatives and capital return programs, including over R$2.4 billion in share buybacks over the past year, have enhanced investor confidence [2][10]. - The company repurchased R$843 million in shares in the first quarter of 2025, contributing to a return on equity (ROE) increase for the Financial Services segment to 27%, up from 23% a year ago [10]. Market Position - StoneCo has outperformed other fintech companies such as PagSeguro Digital and DLocal Limited, which gained 44.4% and 4.7% year to date, respectively [4]. - The stock closed at $13.42, which is 11.9% below its 52-week high of $15.23, indicating potential for future growth [6]. Valuation Metrics - StoneCo's stock is currently trading at a price/earnings ratio of 8.84X forward earnings, significantly lower than its five-year high of 87.87X and below the industry average of 37.72 [13]. - The stock's Value Score of B suggests a discounted valuation, making it an attractive investment opportunity [13]. Industry Outlook - The global fintech market is projected to grow at a robust CAGR of 16.2% from 2025 to 2032, positioning StoneCo to capitalize on broader industry tailwinds [17]. - The company's focus on margin-rich transactions and disciplined share buyback strategy signals strong momentum ahead, enhancing long-term shareholder value [17].

Core Viewpoint - StoneCo Ltd. (STNE) is currently positioned as a stronger value investment compared to Informatica Inc. (INFA), based on various valuation metrics and earnings outlook [3][7]. Valuation Metrics - STNE has a forward P/E ratio of 10.04, significantly lower than INFA's forward P/E of 16.54, indicating STNE may be undervalued [5]. - The PEG ratio for STNE is 0.38, while INFA's PEG ratio is 2.18, suggesting STNE offers better value relative to its expected earnings growth [5]. - STNE's P/B ratio stands at 2.03, compared to INFA's P/B of 2.59, further supporting the notion that STNE is more attractively priced [6]. Earnings Outlook - STNE is experiencing an improving earnings outlook, which enhances its attractiveness in the Zacks Rank model, indicating a stronger potential for future performance compared to INFA [7].

Core Viewpoint - StoneCo Ltd. is positioned as a strong investment opportunity due to its improving earnings outlook and analysts' increasing earnings estimates [1][2]. Earnings Estimates - Analysts are optimistic about StoneCo's earnings prospects, leading to higher estimates that are expected to positively impact the stock price [2]. - The current-quarter earnings estimate is projected at $0.32 per share, reflecting a year-over-year increase of +6.67%. Over the last 30 days, the consensus estimate has risen by 14.29% with no negative revisions [5]. - For the full year, the earnings estimate stands at $1.38 per share, indicating a year-over-year change of +2.22%. Similar to the current quarter, there have been no negative revisions in the past month [6]. Zacks Rank - StoneCo holds a Zacks Rank 1 (Strong Buy), indicating strong agreement among analysts in revising earnings estimates upward, which has led to significant improvements in consensus estimates [3][7]. - The Zacks Rank system has a proven track record, with Zacks 1 Ranked stocks averaging an annual return of +25% since 2008 [3]. Stock Performance - StoneCo shares have increased by 18.4% over the past four weeks, suggesting investor confidence in the company's earnings growth potential [8].

Core Viewpoint - Analyst recommendations play a significant role in influencing stock prices, but their reliability is questionable due to potential biases from brokerage firms [1][5][10]. Group 1: Analyst Recommendations - StoneCo Ltd. (STNE) has an average brokerage recommendation (ABR) of 1.67, indicating a consensus between Strong Buy and Buy, with 77.8% of the nine recommendations being Strong Buy [2][5]. - Brokerage analysts tend to exhibit a strong positive bias in their ratings, often issuing five "Strong Buy" recommendations for every "Strong Sell" [6][10]. - The ABR may not be a reliable standalone indicator for investment decisions, as studies suggest it has limited success in guiding investors toward stocks with high price appreciation potential [5][10]. Group 2: Zacks Rank vs. ABR - The Zacks Rank, which ranges from 1 (Strong Buy) to 5 (Strong Sell), is based on earnings estimate revisions and is considered a more reliable indicator of near-term stock performance compared to ABR [8][9][11]. - The Zacks Rank is updated more frequently than the ABR, reflecting timely changes in analysts' earnings estimates, which correlate strongly with stock price movements [12][11]. - StoneCo has achieved a Zacks Rank 1 (Strong Buy) due to a 9.5% increase in the Zacks Consensus Estimate for the current year, indicating positive sentiment among analysts regarding the company's earnings prospects [13][14].

Core Viewpoint - StoneCo Ltd. reported quarterly earnings of $0.34 per share, exceeding the Zacks Consensus Estimate of $0.32 per share, and showing an increase from $0.29 per share a year ago, indicating a positive earnings surprise of 6.25% [1] Financial Performance - The company posted revenues of $625.86 million for the quarter ended March 2025, which was 1.45% below the Zacks Consensus Estimate, but slightly up from $623.12 million a year ago [2] - Over the last four quarters, StoneCo has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times as well [2] Stock Performance - StoneCo shares have increased approximately 66% since the beginning of the year, contrasting with a decline of 4.3% in the S&P 500 [3] Future Outlook - The company's earnings outlook is crucial for investors, with current consensus EPS estimates at $0.32 for the coming quarter and $1.38 for the current fiscal year, with revenues expected to be $675.52 million and $2.7 billion respectively [7] - The estimate revisions trend for StoneCo is currently favorable, leading to a Zacks Rank 1 (Strong Buy) for the stock, suggesting expected outperformance in the near future [6] Industry Context - The Internet - Software industry, to which StoneCo belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable environment for stock performance [8]

Financial Data and Key Metrics Changes - The company reported a 19% year-over-year growth in revenues and a 2% quarter-over-quarter increase, despite typical seasonality in Q1 [11] - Adjusted gross profit also grew by 19% year-over-year but decreased by 3% sequentially, primarily due to lower quarter-over-quarter TPV and higher service costs [11] - Adjusted net income increased by 23% year-over-year but decreased by 17% quarter-over-quarter, attributed to lower adjusted gross profit and higher investments in distribution channels [11][12] - Adjusted basic EPS was BRL1.97 per share, reflecting a 36% year-over-year increase but a 13% sequential decrease [12] - The company repurchased BRL843 million worth of shares during the quarter, contributing to a distribution yield of 12% over the past twelve months [8][12] Business Line Data and Key Metrics Changes - The Financial Services segment saw revenues grow by 20% year-over-year, driven by repricing initiatives, while adjusted EBT for this segment grew by 21% [18] - The Software segment's revenues increased by 11% year-over-year, mainly due to higher recurring revenues and an increase in the active client base [19] - The MSNB payments active client base grew by 17% year-over-year, reaching 4.3 million clients, with transaction volumes for MSNB cards growing by 10% and PIX volumes by 95% [12][13] Market Data and Key Metrics Changes - Total client deposits reached BRL8.3 billion, a 30% year-over-year increase but a 5% sequential decrease due to seasonality [14] - The company’s total credit portfolio reached BRL1.4 billion, with a focus on working capital offerings to SMB clients [17] - The coverage ratio for provisions was 256%, indicating a stabilization in risk management practices [17] Company Strategy and Development Direction - The company is focused on profitability and has implemented a disciplined capital allocation strategy, including a new share repurchase program of up to BRL2 billion [9][8] - The strategy includes a shift towards time deposits to optimize funding costs and improve capital structure [15][16] - The company aims to enhance its service offerings and distribution capabilities to maintain competitive advantages in the market [54] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macroeconomic environment with rising interest rates but expressed confidence in the company's ability to navigate these challenges [10] - The company expects some deceleration in TPV growth due to repricing efforts and macroeconomic conditions, but overall trends align with long-term guidance [32] - Management emphasized the importance of maintaining a rational competitive environment and focusing on client-centric solutions [5][6] Other Important Information - The company has begun migrating retail deposits to time deposits as part of its cash sweep strategy, which is expected to yield benefits in future quarters [91] - The effective tax rate for the quarter was 19.7%, down from 20.6% in the previous year, reflecting improved tax management [24] Q&A Session Summary Question: Outlook for TPV growth - Management indicated that TPV growth is expected to decelerate somewhat due to higher interest rates and repricing efforts, but overall trends remain in line with long-term guidance [32] Question: Negotiations regarding LINX - Management confirmed ongoing negotiations with Totus regarding LINX, but specific details on valuation and timing could not be disclosed [35] Question: Impact of competition from Mercado Pago and Fiserv - Management noted that while competition is monitored closely, they have not seen significant impacts on their core MSMB segment from new entrants [60][66] Question: Pricing strategy in light of changing yield curves - Management stated that they do not plan to adjust pricing policies despite recent changes in the yield curve, as the majority of repricing has already been implemented [46] Question: Cash conversion and net cash position - Management explained that the decline in net cash was due to seasonal effects and one-off expenses, with expectations for improved cash generation in future quarters [78][81]