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Brazilian investment management company XP Inc is poised for a breakout thanks to efficiency advancements and lower interest rates, according to Bank of America. The bank upgraded XP to buy from neutral on Wednesday with a $29 per share price target. BofA’s forecast implies about 18% upside from Wednesday’s close. XP YTD mountain XP Inc stock has soared more than 59% from the start of 2023. XP has soared nearly 60% in 2023. The firm’s slate of products ranges from fixed income investment to private pension fund management. BofA analyst Mario Pierry highlighted the company’s recent efforts to control costs, which include a 15% workforce reduction earlier this year. “As the largest independent broker in Brazil, XP’s earnings are poised to benefit from an easing cycle, while trading multiples have room to re-rate higher,” Pierry said. “Our sensitivity analysis suggests that EPS growth could exceed 20% in ’24 on a more positive scenario (better yields, inflows, margins).” The analyst also said XP should get a boost from lower rates in Brazil. He noted that the bank’s economists forecast the country’s benchmark rate to be cut by around 4 percentage points over the next 12 months. On Wednesday, the Brazilian central bank kept rates unchanged at a six-year high. Pierry added that he projects XP to notch 15% revenue growth in 2024 on roughly $11 billion of net inflows. — CNBC’s Michael Bloom contributed to this report.
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