Stock Analysis: Stone Co. 80% Price crash - 200% Upside?!

Stone Co. is the leading fintech and payment processing company in Brazil.
Having been a market darling since its IPO, the company has shown a tremendous track record of growth, with a revenue CAGR of 48% and EBITDA CAGR of 45%.
Warren Buffet broke two of his investment rules when purchasing the stock (for $24) in that he participated in the IPO and bought the company when it was showing negative cashflows during a time of rapid growth and expansion.

Recently, the stock price has taken a cliff dive, with the market responding negatively to their write down of an investment in Banco Inter.
These fears IMO are over blown because if you exclude the non-cash write downs, earnings were actually positive over the last quarter.

In this video I explain why I believe the market to be acting irrationally, as it often does, and that Stone Co. could be a sensational opportunity at its current price.

Latam is an emerging market that holds a plethora of opportunities for growth and value investors alike.
Smart phone penetration in Brazil has shown phenomenal growth, yet remains at merely 68% of the population.
With phones, bank accounts and e-commerce having such an impressive runway for growth in Brazil, StoneCo. finds itself with the ability to become the dominant player in everything associated with the growing commerce, banking and transaction activity in Brazil.

I have assigned a very conservative intrinsic valuation of c $25.60 in the near term for the company, which would suggest nearly a 50% upside from here.
However, should we get a multiple expansion on the EV/EBITDA of the company at the level of mean-reversion (20x), the shares could easily return 2-3x our initial investment, without relying on exaggerated growth predictions.

For those looking for a investment portfolio based on value and growth, click on the link here:
Instructions: Copy open trades and hold on for the long term.
All the best & DYODD.
Benjamin.

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[cianle-ginger]

In these longer videos would it be possible to include timestamps

[silentj]

Cheers mate, great analysis the current buying opportunity is amazing, which screen record software are you using btw?

[Mikster_Mindo]

Thanks for your work. Why did you skip PIX at minute 23. That seems to be a killer for the business model… 🤔

[julianschmahl]

Really great video I loved it. My average price right now is 27 usd. Do u think this is still a good price long term?

[shomariwhittaker]

ROIC seems low (3.7%) even when compared to its peers - who are often above 10%. Seems just like you said management isn't as effective as they could be with decision making. That said, it's 80% institutionally owned (finviz), so the big funds are the marginal buyers here and all that really matters are their sentiments toward stoneco.... seeing lots of funds owning more than 4% of float but yet still stoneco accounts for less than 1% or 2% of their portfolios...feels like you'd be swimming with whales who can pump or dump anytime... Madrone Partners L.P seems very biased towards stoneco (82% of their portfolio, and close to 10% of float), do you know why?

[florinserbabh]

Im thinking of buying in in febr march. Do you fellows think the market might correct and drag down Stne, arvl, jmia, and clov? I want to throw in 500k in between this 4, maybe some hood pltr and c3ai as well. Cheers guys!

[TexasGolfer]

Good video, in the interest of transparency, were you paid to do this review?