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Why Shares of Buffett-Backed StoneCo Soared 35% in March -- but Fell 9% on Wednesday

Beth McKenna, The Motley Fool

What happened

Shares of StoneCo (NASDAQ: STNE), a Brazilian financial technology company that legendary investor Warren Buffett recently added to Berkshire Hathway's (NYSE: BRK-A)(NYSE: BRK-B) holdings, soared 35.2% in March, according to data from S&P Global Market Intelligence. The S&P 500 index returned 1.9% last month.

StoneCo stock's fortunes have reversed somewhat in April. Shares dropped 8.7% on Wednesday, April 3, following the company's announcement of a follow-on offering of 19.5 million shares at $40.50 per share. The proceeds from the sale are going to the selling shareholders, not the company. In other words, some early shareholders -- the company went public in October -- are taking some of their profits off the table. Nonetheless, the stock is up 110% in 2019 and up 60.4% from its initial public offering (IPO) price of $24 per share.

Young man and woman behind the counter of what looks like an eatery or coffee shop and looking at a laptop screen.

Image source: Getty Images.

So what

We can attribute StoneCo stock's stellar performance last month largely to the company reporting better-than-expected fourth-quarter results on March 18. The following day, the stock rocketed 18.4%.

For the quarter, as my colleague Matt Frankel reported, StoneCo's revenue more than doubled year over year to $137.6 million (in U.S. dollars), beating Wall Street's $117 consensus estimate. Earnings per share (EPS) came in at $0.27, more than double the $0.13 analysts were expecting. Drivers behind these robust results included total payment volume surging 74% year over year and adjusted net margin jumping to 29.5% from 8.4% in the year-ago period. 

STNE Chart

Data by YCharts.

Now what

On April 1, StoneCo announced preliminary first-quarter 2019 results. In terms of the Brazilian real, it expects about a 60% year-over-year increase in payment volume and roughly 85% and 600% jumps in revenue and net income, respectively. 

For the year, Wall Street is expecting StoneCo to grow revenue and EPS 62% and 114%, respectively, year over year.


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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.