Shares of StoneCo (NASDAQ: STNE), a Brazilian financial technology company that legendary investor Warren Buffett recently added to Berkshire Hathaway's (NYSE: BRK-A)(NYSE: BRK-B) holdings, jumped 17.4% in June, according to data from S&P Global Market Intelligence. The S&P 500 index returned 7.1% last month.
StoneCo stock is up 54.3% in 2019 through July 3, compared with the broader market's 20% return, and 18.5% higher than its October 2018 initial public offering (IPO) price of $24.
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We can probably attribute StoneCo stock's strong June performance in part to some investors believing that its big April sell-off was overdone, particularly in light of the company's strong first-quarter earnings report released in May. Shares plunged 24% on April 18 after news came out that large Brazilian bank Itau Unibanco Holding SA (NYSE: ITUB) will begin to advance credit card payments to small and medium-sized merchants.
In Q1, StoneCo's revenue soared 86% year over year to 535.8 million Brazilian reals (about $134.1 million), beating the $132.5 million Wall Street consensus estimate, and adjusted earnings per share (EPS) rocketed 473% to 0.63 reals (about $0.16), which was in line with expectations.
Moreover, on June 10, StoneCo stock got a 5.1% boost after Goldman Sachs initiated coverage with a buy rating and set a $37 price target. (For context, shares closed at $28.45 on July 3.) The Goldman analyst who covers the stock believes the booming Brazilian market will enable StoneCo to grow rapidly, despite increasing competition.
For the year, Wall Street is expecting StoneCo to grow revenue and earnings per share 58% and 111%, respectively, year over year. Over the next five years, analysts are modeling for average annual earnings growth of 33.5%.
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