In addition to the machine: Stone’s strategy to double profits in four years. The Stone Company, a leading player in the financial services industry, has surprised the market by beating third-quarter expectations. The company’s management is confident that investors should maintain their optimism as they unveil their strategy to double profits in the next four years.
During the company’s Investor Day in New York, Stone announced their ambitious goal of achieving an annual profit in cumulative 2024, delivering a sum of up to in 2027. This impressive target would more than triple the bottom line of the company’s balance sheet.
CEO Pedro Zinner explains that historically, the company has prioritized growth speed. However, they now see numerous opportunities to prioritize efficiency and improve profitability. The company has built a profitable cash flow business strategy that will enable them to achieve their ambitious goals.
Stone believes that the integration with Linx, a software business, will be a key aspect of their strategy to attract new customers. By combining their financial services and software, Stone aims to go beyond their traditional payment processing machines and tap into the lucrative market of micro, small, and medium-sized enterprises (MPMEs).
Stone’s focus on MPMEs is not new, but the company has now decided to bolster their importance even further. With a take rate of 2.7 percent, Stone aims to outpace the industry average and handle payments worth more than by 2027.
In an interview with EXAME Invest, Zinner emphasized that their goal is not to change their strategy entirely, but rather to streamline its implementation and concentrate on the most lucrative opportunities. The core business will still revolve around payment processing, but Stone wants to expand into other financial services and software.
To achieve their growth targets, Stone plans to leverage the synergy between their various business units. The company aims to supply financial products to the customers of their software company, creating a comprehensive “one-stop-shop” solution. Stone has identified four key verticals with the greatest potential for value extraction: grocery stores, restaurants, pharmacies, and petrol stations.
Lia Matos, Stone’s chief strategist, believes that the integration with Linx’s software business is a game-changer. By combining financial services and software, Stone can offer a unique proposition to their clients. This convergence will enable Stone to monetize their customer base more effectively and strengthen their position in the market.
The integration process with Linx has been a long-awaited move in the industry. Since Stone’s acquisition of Linx in 2020, market participants have been seeking clearer signs of business combination. October’s announcement of the restructuring was seen as a positive step towards solidifying the integration strategy.
In addition to payment processing, financial services have emerged as Stone’s main revenue driver. The company’s financial services platform, initially focused on payments, has expanded to include banking and credit solutions. This expansion phase provides Stone with significant opportunities to monetize their customer base.
Stone experienced a setback in 2021 due to the wave of insolvency that affected the industry. However, they have identified opportunities to resume lending cautiously and rebuild their banking vertical. They have restarted production this year and have in available credit. Stone’s CFO, Mateus Scherer, has set a goal of reaching next year and surpassing in card volume by the end of 2027.
Stone’s ambitions are not limited to credit; they also plan to expand their other financial services. The company currently holds deposits of and aspires to grow to next year and by 2027.
Overall, Stone’s strategy to double profits in four years is underpinned by their focus on efficiency, integration with Linx’s software business, and expansion of their financial services offerings. With a clear roadmap in place, Stone is well-positioned to attract new customers, grow their customer base, and achieve their ambitious financial targets.
