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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 recently surpassed third-quarter expectations, surprising the market with its impressive performance. The management of the company is urging investors to remain optimistic and confident in the company’s potential.
The primary target of the Stone Company is to achieve an annual profit of R$1.9 billion by the year 2024, resulting in a cumulative total of up to R$4.3 billion by 2027. This ambitious goal was announced during the company’s Investor Day event held in New York.
CEO Pedro Zinner explains that the company has built a profitable cash flow business strategy. In the past, the company had mainly focused on rapid growth. However, Zinner points out that there are now numerous opportunities to enhance efficiency and improve profitability.
In recent news, Moody’s has downgraded the U.S. AAA rating outlook from stable to negative, signaling potential economic challenges ahead. On a positive note, ExxonMobil has announced plans to construct a li-ion battery factory specifically for electric vehicles, highlighting the growing importance of clean energy solutions.
One of the key areas of focus for the Stone Company is micro, small, and medium-sized enterprises (MPMEs). While this group has always been a priority, their significance has been further emphasized. Stone aims to surpass the industry average growth rate with a 2.7 percent take rate and handle payments worth more than R$600 billion by 2027.
In an interview with EXAME Invest, Zinner emphasizes that the goal is not to change the overall strategy but rather to clearly implement it and focus on the most lucrative opportunities. While the main business remains focused on payment processing, Stone aims to expand beyond card machines by integrating financial services and software into its operations.
The growth strategy will be driven by the synergy between the businesses, leveraging the software company’s existing customer base. The company aims to solidify its position as a “one-stop-shop” solution for its MPME clientele, particularly targeting grocery stores, restaurants, pharmacies, and petrol stations.
Zinner explains, “We’re informing the market about the verticals that hold the greatest potential for value extraction by combining financial services and software.”
The announcement of Stone’s integration strategy with Linx’s software business has had a significant impact. In October, Stone revealed its plans to restructure and integrate Linx into its core business. This move was in response to long-standing demands from the market for clearer signals of business collaboration ever since Stone’s acquisition of Linx in 2020.
Financial services have also emerged as the primary revenue driver for the company. The financial services platform initially focused on payments but has expanded to include banking and credit solutions. Currently, Stone is undergoing an expansion phase in this sector, and Chief Strategist Lia Matos sees the software as a crucial differentiator for monetizing the customer base.
At the beginning of the year, Stone recognized opportunities to resume lending, particularly in the banking vertical. Despite experiencing setbacks in 2021 due to insolvency issues, the company now sees potential in cautiously resuming lending operations.
“We’ve resumed lending this year and have R$113 million in available credit,” says Stone’s CFO, Mateus Scherer. He further adds, “Our goal is to reach R$800 million next year and exceed R$5.5 billion in card transactions by the end of 2027.”
The expansion of financial services extends beyond credit. Stone currently has deposits totaling R$4.5 billion and aims to increase this to R$7 billion next year and R$14 billion by 2027. This highlights the company’s commitment to diversifying its offerings and meeting the evolving needs of its customer base.
In summary, the Stone Company’s strategy to double profits in four years includes integrating with Linx and expanding its software business. With a focus on MPMEs and a goal of surpassing the industry average growth rate, Stone aims to become a comprehensive solution provider for grocery stores, restaurants, pharmacies, and petrol stations. The company’s financial services platform, supported by its software offerings, is expected to play a vital role in driving revenue growth. By strategically leveraging its resources and prioritizing efficiency, Stone is poised to achieve its ambitious profit targets in the coming years.
