XP - Brazil's XP upgraded to Buy at BofA as earnings set to benefit from lower rates
2023-06-22 09:28:31 ET
Bank of America analyst Mario Pierry upgraded shares of XP Inc. ( NASDAQ: XP ) to Buy from Neutral as Brazil's largest independent broker is set to benefit from lower interest rates.
Economists at BofA expect the Brazilian central bank to cut its Selic overnight rate by 400 basis points over the next 12 months, thus XP ( XP ) "trading multiples have room to re-rate higher."
Over the last four quarters, the company's EPS has topped Wall Street expectations every time except for the last quarter of 2022.
"On top of this, recent cost control efforts should support better margins," the note said, including a 15% cut in headcount in early 2023.
XP, trading near 52-week highs, drifted up 0.6% in premarket trading.
However, Pierry voiced one concern: Competition. "We see more active banks as a risk for XP’s AUC growth going forward, as they now use independent digital brands and increased their investment advisors’ base."
The Buy rating disagrees with the SA Quant system rating of Hold and aligns with the average sell-side analyst view.
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Brazil's XP upgraded to Buy at BofA as earnings set to benefit from lower rates