Brazilian financial services firm XP Inc (XP) has made impressive strides, posting top-and-bottom-line beats for the second quarter of 2024. This success can be attributed to a soaring advisor base, which has risen 11% year-over-year, underlining its growing distribution capability across several advisory channels. This has driven a 14% annual increase in total client assets and a 16% hike in active clients over the year. While the stock is down 29% year to date, XP’s management team anticipates improved results for the year’s second half, suggesting a possible catalyst to drive the share price higher.
Investors interested in emerging market exposure may find this a compelling opportunity with upside potential.
XP’s Enjoying Robust Growth
Known as the “Charles Schwab of Brazil,” XP provides a broad range of financial products and services through its XP Platform, which offers clients access to an open investment product platform. Its product catalog ranges from brokerage securities to various insurance products.
The company has recently reported robust growth across key performance indicators. Active clients recently reached 4.6 million, a 16% increase year-over-year, while total client assets increased by 14% year-over-year, reaching BRL1.2 trillion. The firm also set a new record in the total number of advisors, which now stands at 18.3 thousand, making it Brazil’s largest investment sales force.
The company is undergoing corporate restructuring to establish XP Bank as the parent entity in Brazil. This organizational change is expected to lower the cost of capital and improve leverage by enabling the company to issue more Tier 1 and Tier 2 debt. The process is under review by the Central Bank and is anticipated to conclude by year’s end. These organizational, financial, and strategic initiatives are expected to yield higher returns for shareholders in the future.
XP’s Recent Financial Results & Outlook
The company recently reported its Q2 2024 results. Revenue was $809.69 million, beating analysts’ estimates of $770.39 million due to a doubling of its net inflows during the quarter. Further, the company’s earnings per share (EPS) were $0.39, surpassing the consensus estimates of $0.36.
Following its recent quarterly report, XP’s management has indicated that its current strategies, including diversification of distribution channels and sales force expansion, are effectively steering the company toward its 2026 financial targets.
What Is the Price Target for XP Stock?
The stock has been somewhat range-bound, though it declined over the summer, shedding 23% year-to-date. It trades at the lower end of its 52-week range of $16.56 – $27.03, yet technical indicators are mixed. The stock is bullishly trading above its 20-day (17.87) moving average, though it still falls below its 50-day (19.06) moving average.
Analysts following the company have been cautiously optimistic about XP stock. For instance, Morgan Stanley (MS) analyst Jorge Kuri recently reiterated a Hold rating on the shares while keeping the price target at $24.00, noting modest adjustments to earnings projections and stable valuation metrics.
XP is rated a Moderate Buy based on six analysts’ recent recommendations and price targets. The average price target for XP stock is $23.00, representing a potential 24.93% upside from current levels.
XP in Summary
With an expanding advisor base and impressive customer growth, XP has set the stage for ongoing financial growth. Despite recent stock fluctuations, its progress toward 2026 financial targets remains promising. Combine this with a corporate restructuring and the potential to lower capital costs and improve leverage. It makes for an investment opportunity as robust as it is compelling for those ready to seize the opportunities the emerging markets provide.
