Landon Capital

In a noteworthy move, Bank of America (BofA) revised its stance on StoneCo (STNE) shares, flipping the switch from Neutral to Buy and significantly upping the price target from $13 to $17 per share, as detailed in a note released on Thursday.

Analysts, sharing insights with investors, drew attention to Stone’s disclosed blueprint for the upcoming three-year period, noting its uncanny resemblance to the strategies pursued over the past four years.

The objective remains clear: ramping up the monetization of their client base by offering a blend of banking, credit, and software services, all the while seizing a larger slice of the market in the MSMB segment.

Acknowledging that this strategy hadn’t unfolded as anticipated in the preceding four years, primarily due to execution hiccups and a tumultuous industry landscape, analysts pointed out a marked change. The company has undergone significant leadership restructuring, welcoming a new CEO, CFO, Head of Credit, and Head of Technology. With a newfound emphasis on cost efficiency, analysts are optimistic about the potential for improved outcomes this time around.

Expressing confidence in the credibility of the company’s 2024 projections, the analysts hiked the stock rating and price target, attributing it to the amplified earnings estimates.

However, they remained mindful of the recent surge in StoneCo’s stock, witnessing a 25% rally over the past three days. This surge followed the release of robust third-quarter results, the initiation of a R$1.0bn buyback program, and upbeat forecasts shared during the Investor Day. Anticipating ongoing support for the stock’s performance in the upcoming months, they highlighted the rising Consensus forecasts as a potential driving force.

In essence, Bank of America’s bullish reevaluation reflects both the company’s strategic realignment and a revised outlook on the potential for StoneCo’s growth trajectory.