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XP (XP)
NASDAQ:XP
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XP
(NASDAQ:XP)
75Outperform
Positive Factors
Capital Distribution
Management announced a hefty capital distribution of R$3.0bn in the form of dividends and buybacks, equivalent to a payout ratio of over 90% and a yield of 5.8%.
Earnings
Recurring net income was R$1,210 million, up 2% quarter over quarter and 16% year over year, coming in 1% above consensus and 9% above our estimate.
Market Positioning
XP is well positioned to capture market share from incumbents due to its highly attractive long-term growth story.
Negative Factors
Capital Intensity
BIS ratio declined 380bp to 17.7%, indicating that the shift in strategy could lead to a more capital-intensive company.
Cost Management
EBT margin contracted 470bp QoQ to 28.1% and is running below management's medium-term target of 30-34% on the back of higher COGS and SG&A expenses.
Revenue Growth
Gross revenues growth decelerated to 4% year-over-year, pressured by weaker growth across all business lines.
XP (XP) vs. S&P 500 (SPY)
Market Cap
$8.03B
Dividend Yield<0.01%
Average Volume (3M)7.90M
Price to Earnings (P/E)9.5
Beta (1Y)1.10
Revenue Growth6.46%
EPS Growth6.85%
CountryUS
Employees6,834
SectorFinancial
Sector Strength81
IndustryFinancial - Capital Markets
Share Statistics
EPS (TTM)1.55
Shares Outstanding436,776,100
10 Day Avg. Volume9,671,477
30 Day Avg. Volume7,902,509
Financial Highlights & Ratios
PEG Ratio1.38
Price to Book (P/B)N/A
Price to Sales (P/S)15.61
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$16.00Price Target Upside9.07% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
XP Business Overview & Revenue Model
Company DescriptionXP Inc. is a Brazilian investment management company that operates in the financial services sector. It offers a wide range of financial products and services, including brokerage, wealth management, and financial advisory. XP is known for its digital platform that provides clients with easy access to investment opportunities, education, and financial planning tools.
How the Company Makes MoneyXP Inc. generates revenue primarily through its brokerage services, by charging commissions and fees on trades executed through its platform. The company earns money from asset management fees by managing investment funds and portfolios for its clients. Additionally, XP benefits from partnership agreements with financial institutions, which further enhance its service offerings and contribute to its earnings. The company also earns revenue from financial advisory services by providing strategic investment advice to individual and institutional clients.
XP Financial Statement Overview
Summary
XP's financials indicate strong growth and improved financial health. The income statement highlights significant revenue and margin improvements, driven by operational efficiencies. The balance sheet shows prudent leverage management and robust equity returns. Cash flow statements underscore strong cash generation and effective capital management, positioning XP well for future opportunities in the capital markets industry.Income Statement
XP has demonstrated strong revenue growth with a notable increase from $6.53 billion in 2023 to $16.25 billion in 2024. The gross profit margin in 2024 stands at 100%, indicating efficient cost management, though this is due to total revenue equaling gross profit. The net profit margin improved significantly to 27.78% in 2024, from 59.66% in 2023, due to increased revenue despite higher net income in 2023. EBIT margin improved substantially from a negative margin in prior years to 60.94% in 2024, demonstrating improved operational efficiency.82
Very Positive
Balance Sheet
XP's balance sheet reflects a healthy equity ratio of 5.77% in 2024, indicating a conservative leverage profile, although lower than previous years. The debt-to-equity ratio improved to 1.36 from 1.83 in 2023, showcasing better leverage management. Return on equity improved to 22.53% in 2024 from 20.04% in 2023, reflecting strong equity utilization despite the volatile financial environment.75
Positive
Cash Flow
The operating cash flow to net income ratio remains robust at 2.48 in 2024, indicating strong cash-generating ability compared to profits. Free cash flow growth is significant, increasing from $7.93 billion in 2023 to $11.03 billion in 2024, highlighting improved cash management. The free cash flow to net income ratio is solid at 2.44, reflecting efficient conversion of profits into free cash flow.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 16.25B | 6.53B | 6.51B | 6.20B | 5.02B | Gross Profit |
| 16.25B | 761.11M | 472.13M | 2.77B | 2.37B | EBIT |
| 9.90B | -3.79B | -3.41B | -1.89B | -505.00M | EBITDA |
| 0.00 | 4.81B | -3.21B | -1.66B | -361.74M | Net Income Common Stockholders |
| 4.51B | 3.90B | 3.58B | 3.59B | 2.08B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 5.61B | 3.94B | 44.09B | 36.22B | 22.05B | Total Assets |
| 347.46B | 249.04B | 192.03B | 139.34B | 96.03B | Total Debt |
| 27.30B | 35.54B | 35.52B | 28.21B | 32.67B | Net Debt |
| 21.69B | 31.60B | 31.97B | 25.72B | 30.71B | Total Liabilities |
| 327.41B | 229.59B | 174.99B | 124.92B | 85.13B | Stockholders Equity |
| 20.04B | 19.45B | 17.04B | 14.42B | 10.89B |
| Cash Flow | Free Cash Flow | |||
| 11.03B | 7.93B | 1.68B | -4.37B | 1.22B | Operating Cash Flow |
| 11.18B | 8.13B | 1.80B | -4.02B | 1.51B | Investing Cash Flow |
| -1.67B | 538.81M | -371.28M | -1.15B | -582.01M | Financing Cash Flow |
| -5.78B | -4.39B | -200.30M | 6.64B | 788.71M |
XP Technical Analysis
Negative
14.67
Price Trends
14.13
Positive
13.92
Positive
15.56
Negative
Market Momentum
0.19
Positive
50.29
Neutral
34.17
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For XP, the sentiment is Negative. The current price of 14.67 is below the 20-day moving average (MA) of 14.75, above the 50-day MA of 14.13, and below the 200-day MA of 15.56, indicating a neutral trend. The MACD of 0.19 indicates Positive momentum. The RSI at 50.29 is Neutral, neither overbought nor oversold. The STOCH value of 34.17 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for XP.
XP Risk Analysis
XP disclosed 83 risk factors in its most recent earnings report. XP reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
XP Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $173.71B | 14.16 | 11.95% | 2.05% | 14.80% | 77.97% | |
75 Outperform | $8.03B | 9.48 | 23.14% | <0.01% | 6.46% | 6.85% | |
74 Outperform | $71.42B | 25.11 | 19.20% | 0.57% | 19.54% | 22.23% | |
71 Outperform | $1.07B | ― | 11.11% | ― | ― | ― | |
70 Outperform | $148.41B | 26.83 | 13.30% | 1.27% | 1.87% | 17.63% | |
67 Neutral | $191.93B | 15.38 | 13.16% | 2.97% | 7.16% | 53.77% | |
64 Neutral | $14.53B | 10.25 | 8.67% | 4.22% | 16.51% | -12.20% |
* Financial Sector Average
Performance Comparison
XP
XP
14.67
-9.33
-38.88%
IBKR
Interactive Brokers
169.00
57.67
51.80%
MS
Morgan Stanley
119.00
28.48
31.46%
SCHW
Charles Schwab
79.60
8.24
11.55%
GS
Goldman Sachs Group
558.92
154.34
38.15%
AMTD
AMTD IDEA Group
1.08
-0.66
-37.93%
XP Earnings Call Summary
Earnings Call Date: Feb 18, 2025 | % Change Since: -2.33% | Next Earnings Date: May 20, 2025
Earnings Call Sentiment Positive
The earnings call highlighted significant growth in client assets, revenues, and profitability, driven by strong performance in fixed income and corporate segments. However, there were challenges related to the macro-environment, potential lower DCM activity, and increased provisions. Overall, the company showed resilience and confidence in achieving its guidance despite these challenges.Highlights
Record Client Assets
Achieved BRL1.22 trillion in client assets, marking a 9% growth year-over-year.
Advisor and Client Base Growth
Reached 18,200 advisors (5% growth YoY) and 4.7 million clients (3% growth YoY).
Gross Revenue and EBT Growth
Gross revenues reached BRL18 billion with a 15% growth year-over-year, and EBT grew by 26% YoY to BRL5 billion.
Adjusted Net Income and ROTE
Recorded the highest quarterly adjusted net income since IPO at BRL1.2 billion in Q4 '24, totaling BRL4.5 billion for the year (17% expansion YoY). ROTE achieved 28.7% in 2024 with a 376 bps expansion.
Strong Performance in Fixed Income
Fixed income daily average traded volume reached 40,000 trades in 2024, with XP being a major market maker in Brazil.
Retail Credit Growth
Retail credit NII posted 79% growth YoY, marking BRL81 million in revenues this quarter.
Corporate and SMB Segment Growth
Marked a 45% growth in revenues, with issuer services delivering 46% growth during the year.
Capital Returns
Total payout ratio was 74% with BRL3.6 billion capital return, maintaining a goal to deliver more than 50% payout ratio in the next couple of years.
Lowlights
Challenging Macro Environment
Faced a challenging macro-environment with high interest rates affecting certain revenue streams.
Potential Lower DCM Activity
Expectation of potential lower DCM volumes in 2025, especially in Q1 due to seasonality.
Expense Management Challenges
SG&A grew by 10% during the year, with a need for continuous investment in strategic areas while maintaining efficiency.
Provisions Increase
Provisions increased to a level of BRL100 million per quarter, slightly higher than previous quarters.
Company Guidance
In the earnings call for fiscal year 2024, XP Inc. reported a record-setting performance, highlighting several key financial metrics. The company achieved client assets of BRL1.22 trillion, marking a 9% growth year-over-year, and expanded its advisor network to 18,200, a 5% increase. The client base grew by 3% to 4.7 million. Gross revenues reached BRL18 billion, a solid 15% growth from the previous year, while EBT surged by 26% to BRL5 billion. The highest quarterly adjusted net income since the IPO was recorded at BRL1.2 billion for the fourth quarter, totaling BRL4.5 billion for the year, representing a 17% increase. XP maintained a robust 28.7% ROTE, with a 376 bps expansion over 2023, and achieved a 23% ROE, a growth of 163 bps. The company also achieved an adjusted diluted EPS growth of 16% and anticipates EPS to grow faster than net income due to its share buyback program. Despite a challenging macroeconomic environment, XP anticipates continued growth across its business segments, with a projected CAGR of 12% to 22% to meet its 2026 guidance.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.