Stone’s Strategy: Doubling Profits with Integration and Innovation for Future Growth
In addition to the machine, Stone has developed a comprehensive strategy to double its profits within four years. The company’s latest move includes integrating with Linx, a software business, in an effort to attract new customers and expand its software offerings. The Stone Company has recently surpassed third-quarter expectations, surprising the market and instilling optimism among investors.
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The company aims to achieve an annual profit of R$1.9 billion by 2024, with a cumulative total of up to R$4.3 billion by 2027. This ambitious goal was announced during the company’s Investor Day in New York. CEO Pedro Zinner explained that Stone has built a profitable cash flow business strategy, prioritizing efficiency to improve profitability. Moody’s downgraded the U.S. AAA rating outlook from stable to negative, while ExxonMobil announced its plans to construct a li-ion battery factory for electric vehicles. Amidst these developments, the micro, small, and medium-sized enterprises (MSMEs) have emerged as a highlighted sector for Stone. With a take rate of 2.7 percent, the company aims to outpace the industry average and handle payments worth more than R$600 billion by 2027.
During an interview with EXAME Invest, Zinner emphasized that the goal is not to change the strategy, but rather to clarify the implementation process and focus on the most lucrative opportunities. While the main focus remains on the acquiring business, Stone intends to expand beyond card machines by integrating financial services and software solutions.
The growth strategy will rely on the synergy between the different aspects of the company’s operations. One of the main objectives is to supply financial products to the customers of the software company. Stone aims to become a “one-stop-shop” solution for its MSME clientele, with a particular focus on grocery stores, restaurants, pharmacies, and petrol stations.
“We want the market to know which verticals have the greatest potential for value extraction by combining financial services and software,” said Zinner.
The integration strategy with Linx’s software business has received significant attention following the announcement. In October, Stone revealed its plans to restructure the company to incorporate Linx into its core operations. This move was a long-awaited demand from the market, which had been requesting clearer signs of business integration since Stone’s acquisition of Linx in 2020.
Financial services were identified as the main revenue driver for the company. The financial services platform, initially focusing on payments but now expanding to encompass banking and credit solutions, is currently in an expansion phase. Lia Matos, Stone’s chief strategist, believes that the software aspect of the business holds great potential for monetizing the customer base, stating that “the software comes in as a differentiator.”
In the beginning of this year, Stone identified an opportunity to resume lending, strengthening its banking operations. The company faced significant challenges in 2021 due to the wave of insolvencies, but now, two years later, it sees an opportunity to cautiously resume operations. Stone’s CFO, Mateus Scherer, revealed that the company has resumed production this year and has R$113 million available in credit. The goal is to reach R$800 million in credit by next year and surpass R$5.5 billion in card transactions by the end of 2027.
Aside from credit, Stone also plans to expand its range of financial services. The company currently holds deposits of R$4.5 billion and aims to increase that to R$7 billion by next year and R$14 billion by 2027.
Overall, Stone’s strategic plan to double profits within four years encompasses various elements, including integrating with Linx’s software business and expanding its range of financial services. The company aims to leverage efficiency and capitalize on the potential of MSMEs, ultimately achieving substantial growth in the coming years.
