StoneCo...The Square Of Brazil
Yesterday, @coyotelation wrote a post about PIX and who it will be a game changer in Brazil. In the most, @coyotelation makes a great case for PIX since it's an instant payment platform created by the Central Bank of Brazil.
Financial technology or fintech for short, is the new technology that aims to compete with the traditional banking industry in delivering / selling financial services and solutions to customers. When I think of Fintech, I immediately think of Paypal and Square. But I can't fail to think that other countries have their own versions of Paypal and Square and it would be ignorant and naive of me to think that investing in fintech in other countries won't be lucrative as well. It always helps when you can invest in overseas companies that trade on the US public exchanges. So after reading @coyotelation post, StoneCo. Ltd. came to mind.
StoneCo Ltd. provides financial technology solutions that empower merchants and integrated partners to conduct electronic commerce across in-store, online, and mobile channels in Brazil. StoneCo, a payment processing company based in Brazil that went public a couple of years ago.
What was surprising to see is Warren Buffet’s Berkshire owns 5% of the stock and acquired those stocks during the IPO. Historically, Buffet is a value investor, but in recent years has come around and warmed up to tech stocks. Now whether it was him or somebody in his camp that bought the stocks is one thing, it’s another thing to think about the opportunity StoneCo has not only in Brazil, but Latin America. But that’s if Facebook has anything to say about it.
Two months ago, Facebook Inc.’s WhatsApp messenger launched a payments feature in Brazil. Facebook has partnered with Cielo SA of Brazil and payments on WhatsApp will be free for users, whether sending to friends on the app or to pay a business for goods and services. However, StoneCo isn’t just a one trick pony.
The company revealed it handled 51% of Brazil's e-commerce transactions in Q1 2020. It's the dominant force to be reckoned with in the country on the cashless payments front, but e-commerce is still just a mid-single-digit percentage of total retail spending. That's changing fast, though. StoneCo isn't just benefiting from the rapid transition to online shopping.
As if digital payments weren't enough, the company has also started offering credit services to merchants operating on its platform. It introduces new potential risk if those merchants start to default on loans, but Stone's tech helps it vet who needs some help and checks the ability of the customer to make payments based on the transaction history Stone already has. That kind of real-time operational activity data is an advantage most banks don't have, and it could help Stone maintain its massive momentum in the coming years.
Just yesterday I wrote about Jumia Technologies, the Amazon of Africa. With 1.3 billion people in Africa, Jumia operating in 14 countries that make up about half of Africa’s population and with those countries representing three-quarters of Africa's GDP, investors are starting to take notice.
StoneCo is in a similar situation. According to CellPointDigital, 85% of transactions in Latin America were conducted in cash last year. And when it comes to Brazil, with over 200 million people, e-commerce accounted for the less than 10% of total Brazilian retail spending last year.
Sound like StoneCo is worth keeping on your watch list and if you believe in the story, the chart suggests to go long at the weekly demand at $36.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
