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Why StoneCo Jumped and Upstart Stock Crashed

The fintech market has mixed performance. Brazil’s StoneCo (STNE) snapped a disappointing trend by posting strong Q3/2023 results. In the lending business, AI-based lender Upstart (UPST) posted troubling developments. Its stock fell sharply after the Q3 report.

StoneCo posted revenue rising by 25.1% Y/Y to R$3.14 billion. Non-GAAP EPS was R$1.32. Importantly, the firm approved a stock buyback on Sep. 21, 2023, worth R$ 300 million. This cuts the stock float and increases shareholder returns.

The firm benefited from a 29% increase in financial services platform revenue. Its active client base increased in Q3. Also, it improved its commercial policy. EBT margin rose by 2.2% sequentially to 17.3%. Margins improved when StoneCo consolidated its revenue growth and cut administrative and financial expenses. Higher cost of service offset the margin growth.

Upstart posted the opposite story. It lost $0.05 a share as revenue fell by 14.4% Y/Y to $134.56 million. In Q4, the firm expects revenue of $135 million, flat sequentially. It will report a net interest income loss of around $15 million.

UPST stock traded at $400 just two years ago. When interest rates rose since then, Upstart could not adjust its business model. Rates will more likely rise than fall. Without a rate cut, the business will flounder.

Avoid UPST stock while considering STNE.