In addition to the machine: Stone’s strategy to double profits in four years. The company’s strategy now includes integrating with Linx in an effort to attract new customers via its software business.
The Stone Company has exceeded expectations in the third quarter, surprising the market with its strong performance. The management of the company is optimistic about the future and encourages investors to maintain their optimism as well.
The company has set an ambitious target of achieving an annual profit of R$1.9 billion by 2024, with a cumulative profit of up to R$4.3 billion by 2027. This would more than triple the current bottom line of the company’s balance sheet. This exciting goal was announced at the company’s recent Investor Day event held in New York.
According to CEO Pedro Zinner, the company has developed a profitable cash flow business strategy. In the past, the company has prioritized growth speed, but now it sees many opportunities to use efficiency to improve profitability. This shift in focus has been well-received by investors and financial analysts.
In a surprising turn of events, Moody’s has downgraded the U.S. AAA rating outlook from stable to negative. This unexpected announcement has created a stir in the market and may impact Stone’s future plans. However, the company remains determined to achieve its projected growth and profitability targets.
Another interesting development in the industry is the recent announcement by ExxonMobil regarding its plans to construct a li-ion battery factory for electric vehicles. This signals a growing interest and investment in the electric vehicle market, which could have implications for Stone’s business strategy in the long term.
One particular segment that Stone is focusing on is micro, small, and medium-sized enterprises (MPMEs). This group has always been a priority for the company, but its importance has been further bolstered. With a targeted take rate of 2.7 percent, Stone aims to outpace the industry average and handle payments worth more than R$600 billion by 2027.
In an interview with EXAME Invest, CEO Pedro Zinner emphasized that the company’s goal is not to change its strategy completely, but rather to make the implementation process clear and focus on the most lucrative opportunities. While the main business remains in payment processing, Stone aims to expand beyond card machines by integrating financial services and software into its offerings.
The growth strategy will be driven by the synergies between the different businesses. The goal is to leverage the software company’s customer base and provide them with financial products and services. Stone will primarily focus on four key sectors – grocery stores, restaurants, pharmacies, and petrol stations – to solidify its position as a “one-stop-shop” solution for its MPME clientele.
CEO Pedro Zinner is excited about the potential for these sectors to generate value through the combination of financial services and software. The integration strategy with Linx’s software business is a crucial step in this direction. In October, Stone announced plans to restructure and incorporate Linx into its core business, responding to a long-standing market demand for clearer signs of business combination following the acquisition of Linx in 2020.
Financial services have also emerged as a major revenue driver for Stone. The company’s financial services platform, initially focused on payments, has expanded to include banking and credit solutions. This expansion phase is seen as an excellent opportunity for Stone to monetize its customer base, with the software business acting as a key differentiator.
At the beginning of the year, Stone identified the potential for growth in its lending operations, particularly in the banking vertical. However, the company faced challenges in 2021 due to the wave of insolvencies. Nevertheless, the company is cautiously optimistic about the future and plans to gradually resume lending operations.
Stone’s CFO, Mateus Scherer, announced that the company has already resumed production this year and has R$113 million in available credit. The goal is to increase this amount to R$800 million next year and reach over R$5.5 billion in card operations by the end of 2027.
In addition to credit, Stone aims to expand its range of financial services. The company currently has deposits of R$4.5 billion and aims to grow this amount to R$7 billion next year and R$14 billion by 2027. This reflects the company’s commitment to diversifying its revenue streams and providing a comprehensive suite of financial solutions to its customers.
In conclusion, Stone’s strategy to double profits in four years is off to a promising start. The company’s integration with Linx’s software business and its focus on MPMEs and financial services are key drivers of growth. With prudent planning and a clear vision for the future, Stone is well-positioned to achieve its ambitious goals and deliver significant value to its shareholders.