UBS downgrades StoneCo stock rating on rate concerns, cuts target

StoneCo (STNE) shares fell 30.5% after incumbent President Lula won Brazil's election, disappointing investors who had hoped for a conservative victory. The company, a Brazilian e-commerce software provider, is incorporated in the Cayman Islands. Analysts expect 16% annual earnings growth over the next five years, with a current P/E ratio of 4.2.

XP Inc. (XP) fell 52% after Lula's presidential win in Brazil. Other Brazilian banks and investment firms also saw declines: Bradesco (BBD) down 28%, Itaú (ITUB) 25%, Patria (PAX) 16%, and Santander Brasil (BSBR) 12%. Analysts expect XP's earnings per share to rise 43% from 2025 to 2028, but risks include political uncertainty and a weaker real.

StoneCo (STNE) shares fell 34.7% in pre-market trading after Brazil's President Lula won re-election, surprising markets. Investors had expected a Bolsonaro win, which would have favored tighter fiscal policy. StoneCo's decline reflects concerns about higher interest rates and a weaker revenue outlook under Lula's administration. The stock dropped to $7.50, below its 52-week low of $8.95. The broader U.S. market remained flat, indicating the move was driven by Brazil-specific factors.

StoneCo (STNE) reported Q2 revenue of BRL 3.6B (+2.5% YoY), with credit portfolio doubling to BRL 3.8B. Credit revenues surged 153% to BRL 348.5M, but cost of risk rose to 21.5% and non-performing loans increased to 8.60%. The company expanded banking services and completed BRL 3.0B in buybacks, reducing shares by 40.3M. EPS rose 8.6% to BRL 2.40 despite a net income slip.

StoneCo (STNE) reported Q2 2026 revenue of BRL 3.6B (+2.5% YoY), TPV of BRL 142.2B (+4.3% YoY), and adjusted net income of BRL 582.7M (-2.6% YoY). Management maintained 2026 guidance but expects performance near the lower end due to higher interest rates and merchant defaults. The company is integrating Pagar.me to expand banking and credit services, aiming to unify merchant operations. Share buybacks totaled BRL 3.0B over the past year, and an extraordinary dividend of BRL 3.08B was paid in May

Nu Holdings shares rose about 10% to a five-month high after the company reported record Q2 net income of roughly $1.1 billion, up 49% year over year, and gross revenue near $5.9 billion. StoneCo fell about 6% on a “more challenging” backdrop. Susquehanna raised Nu’s price target to $16 with a Neutral rating.