STNE Stock Rides on Deposit Strategies, Attractive Valuation

In the first quarter of 2025, StoneCo Ltd.’s STNE deposit growth was fueled by rising Pix (Brazilian instant payment ecosystem) usage, strategic bundling and its cash sweep strategy. Pix transaction volume surged 95% year over year, significantly outpacing card transaction growth. This shift was driven by Pix cannibalizing debit and cash usage. Higher Pix usage boosts client deposit flows, supporting broader financial service engagement and funding strategies. Total client deposits reached R$8.3 billion, up 38% year over year, despite a 5% sequential dip due to seasonality. Deposits represented 6.9% of micro, small, and medium-sized businesses (MSMB) total payment volume (TPV), and continued to grow faster than payment volumes. 

StoneCo advanced its cash sweep strategy, converting retail deposits into on-platform time deposits. The cash sweep migration began late in the first quarter, with limited impact so far, but is expected to yield 75-125 bps annual net benefit per R$1 billion converted going forward. The strategy supports reduced funding expenses, helping offset interest rate volatility and fueling credit portfolio growth. This shift supports improved margins and a stronger capital structure.

Together, these efforts in deposit scaling enhance client retention, enable cost-effective funding of the credit portfolio, and contribute positively to profitability.

Key Competitors of STNE

Nu Holdings Ltd. NU accelerated deposit growth in the first quarter of 2025, reaching $31.6 billion, up 48% year over year, driven by strong momentum in Mexico and Colombia. Growth stemmed from expanding local retail funding to support credit operations and improve underwriting data. While Brazil saw slight seasonal softness, the company invested in building scalable, low-cost deposit franchises. These efforts deepened customer relationships, enhanced funding resilience, and laid the foundation for sustainable credit growth across its newer markets. Additionally, Pix financing rebounded after a cautious pullback, with record originations in March. 

Another fintech player, MercadoLibre, Inc. MELI, is leveraging Pix to drive deposit scaling and financial engagement. In the first quarter, MercadoLibre drove deposit growth by offering attractive remuneration on balances, such as 120% of CDI in Brazil, to deepen user engagement and position Mercado Pago as a primary financial account. This boosted monthly active fintech users to 64 million, up over 30% year over year. High-yield accounts increased user loyalty, spending, and ecosystem activity, while strategic branding tied Mercado Pago closer to the broader MELI platform, reinforcing financial integration.

STNE’s Stock Price Performance

Year to date, shares of StoneCo have gained 80% compared with the industry’s growth of 13.2%. The S&P 500 composite also grew 2.1% in the same period.

StoneCo’s Valuation

STNE’s valuation looks attractive. The stock trades at a forward 12-month price-to-earnings (P/E) of 9.45X, lower than the industry average of 39.61X. It carries a Value Score of B.

STNE Consensus Estimate Trend

The Zacks Consensus Estimate for STNE’s earnings has been on the rise over the past 30 days.

STNE stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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