Core Insights - Fintech stocks, particularly StoneCo and Upstart, are gaining attention for their unique business models and growth trajectories [1][3] - StoneCo focuses on payments and financial services for small and medium-sized businesses in Brazil, while Upstart leverages AI for credit underwriting [2][21] StoneCo Overview - StoneCo reported a 27% year-over-year increase in adjusted net income and a 22% return on equity in Q2 2025, despite Brazil's challenging economic conditions [4] - The MSMB payments segment grew its client base to 4.5 million, a 17% increase, and PIX QR Code transaction volume rose by 59% [5] - The company’s integrated banking platform saw deposits increase by 36% year-over-year, with 83% of deposits being time-based, providing a stable funding base [5] - StoneCo's credit portfolio grew by 25% sequentially, with stable nonperforming loans, indicating disciplined underwriting practices [5] - The strategic sale of non-core assets allows StoneCo to focus on its core operations and target a total addressable market estimated at BRL 100 billion [6] - StoneCo has repurchased nearly BRL 2.6 billion in shares over the past year, reflecting management's confidence in the company's growth potential [6] - The company’s diversified revenue streams and margin expansion suggest it can maintain profitability even in a tough economic environment [7] Upstart Overview - Upstart's revenues surged to $257 million in Q2 2025, a 102% year-over-year increase, and the company returned to GAAP profitability with a net income of $5.6 million [8] - Loan originations reached $2.8 billion, driven by Upstart's AI model, which improved loan separation accuracy by 17 percentage points [8] - The company’s technology has led to improved conversion rates, rising from 19% to 23.9%, with 92% of loans now fully automated [9] - Upstart's diversification into auto and home lending is gaining traction, contributing to an 85% year-over-year increase in contribution profit [10] - However, Upstart's growth is accompanied by volatility due to its exposure to credit-sensitive borrowers and reliance on capital market sentiment [11][12] Financial Estimates and Valuation - Zacks Consensus Estimate for StoneCo implies a 15.73% increase in sales and a 22.86% increase in EPS for 2025 [13] - Upstart's sales are expected to rise by 73.32% in 2025, with upward revisions in EPS estimates over the past three months [14] - StoneCo is trading at a forward Price/Sales (P/S) ratio of 1.92, significantly lower than Upstart's 4.13, indicating a more favorable valuation for StoneCo [17] - Over the past three months, StoneCo shares have outperformed both Upstart and the S&P 500 composite [18] Conclusion - StoneCo is characterized by stable funding, recurring revenues, and robust cash generation, making it a more balanced and resilient fintech option [21][22] - Upstart, while offering explosive growth potential, is more susceptible to credit cycles and market volatility [21] - StoneCo's strategic focus on small business payments and banking in Brazil presents a significant growth opportunity with lower cyclicality [21]