Is StoneCo a Buy?
As coronavirus spreads around the world, industries sensitive to economic downturns have been getting hit hard. Digital payments and banking are one such example, since their businesses are highly reliant on money continuing to move freely through the system. High-growth digital payments platform StoneCo (NASDAQ: STNE) -- a Warren Buffett portfolio holding and rough equivalent to Square (NYSE: SQ) in Brazil -- has been hit especially hard. The stock is currently down 50% from all-time highs and is below its public debut price in late 2018.
There are good reasons for the pullback. This fintech stock carried an incredibly high premium headed into the crisis, and Brazil has by no means been immune to the effects of COVID-19. Some disruption is likely, and StoneCo remains priced for continued fast expansion.
Emerging markets like Brazil are in a tough position fighting coronavirus. Resources to combat the disease itself are limited, and the financial firepower to prop up the economy is less than in developed markets with deeper pockets and cheaper borrowing costs. Even as it negotiates with the country's largest banks regarding a bailout package, Brazil's central government expects GDP growth to be zero this year. The World Bank is decidedly gloomier, calling for a 5% contraction in economic activity.
Source Fool.com
