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XP (XP)
NASDAQ:XP

XP (XP) AI Stock Analysis

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XP

XP

(NASDAQ:XP)

Rating:78Outperform
Price Target:
$22.50
▲(14.56%Upside)
XP's strong technical momentum and positive earnings call sentiment are the primary drivers of its strong score. Financial performance is solid, with notable revenue and cash flow growth, although high leverage presents some risk. The attractive valuation further supports the positive outlook.
Positive Factors
AUC Growth
Total AUC reached R$1,328 billion, up 8% q/q and 16% y/y, coming 5% above consensus.
Corporate & Issuer Services Revenue
Corporate & Issuer Services Revenue was R$599 million, up 9% quarter over quarter and 18% year over year, coming 10% above consensus and 6% above our estimate.
Net Inflows
Net inflows were R$23.5 billion, up 79% y/y, coming 7% above consensus.
Negative Factors
Recurring Net Income
Recurring net income was R$1,236 million, coming in 5% below consensus and our estimate.
Retail Revenue
Retail revenue was R$3,441 million, coming in 4% below consensus and 5% below our estimate.
Retail Revenue Yield
Retail net inflows declined 20%, with retail revenue yield deteriorating due to weaker mix and lower yield in equities.

XP (XP) vs. SPDR S&P 500 ETF (SPY)

XP Business Overview & Revenue Model

Company DescriptionXP Inc. provides financial products and services in Brazil. It offers securities brokerage, private pension plans, commercial, and investment banking products, such as loan operations and transactions in the foreign exchange markets and deposits; product structuring and capital markets services for corporate clients and issuers of fixed income products; advisory services for mass-affluent and institutional clients; and wealth management services for high-net-worth customers and institutional clients. The company also offers Xpeed, an online financial education portal that offers seminars, classes, and learning tools to help teach individuals on topics, such as basics of investing, techniques, and investment strategies, as well as insurance brokerage services. In addition, it operates XP Platform, an open product platform that provides clients to access investment products in the market, including equity and fixed income securities, mutual and hedge funds, private equity, structured products, credit cards, loan operations, life insurance, pension plans, real-estate investment funds, and others. The company was founded in 2001 and is based in São Paulo, Brazil.
How the Company Makes MoneyXP Inc. generates revenue primarily through the provision of brokerage services, asset management fees, and financial advisory services. The company earns commissions from trading activities conducted by its clients on various financial instruments, including stocks, bonds, and derivatives. Additionally, XP Inc. charges management fees for assets under management in its investment funds. The company also benefits from interest income on margin loans provided to customers for trading activities. Strategic partnerships with other financial institutions and technology providers further enhance its revenue streams, contributing to the company's overall earnings.

XP Earnings Call Summary

Earnings Call Date:May 20, 2025
(Q1-2025)
|
% Change Since: 5.82%|
Next Earnings Date:Aug 19, 2025
Earnings Call Sentiment Neutral
The earnings call reflected a strong performance in net income and ROE, along with growth in client assets and retail credit. However, challenges remain with lower-than-expected revenue growth and difficulties in the equity and issuer services segments.
Q1-2025 Updates
Positive Updates
Record Net Income
Achieved the all-time high quarterly net income in the company's history, posting BRL1.236 million, representing a 20% year-over-year growth.
Strong ROE Performance
Achieved a 24.1% ROE during the quarter, with a 340 bps expansion versus the first quarter of ‘24.
Growth in Client Assets
Client Assets plus AUM and AUA achieved BRL1.8 trillion, posting a 13% growth year-over-year.
Retail Credit Growth
Retail credit NII posted 48% growth year-over-year, marking BRL82 million in revenues in the quarter.
Improved Efficiency Ratio
Achieved the lowest efficiency ratio in the company's history at 34.1%, lower by 204 basis points year-over-year.
Successful Share Buyback Program
Ended the previous share buyback program and announced a new one of BRL1 billion, part of the capital distribution plan.
Negative Updates
Gross Revenue Growth Below Guidance
Total gross revenues for the quarter reached BRL4.6 billion, representing a 7% increase year-over-year, below the guidance of at least 10% growth for the year.
Issuer Services Revenue Decline
Issuer Services delivered flattish revenues year-over-year, marking BRL282 million and a decrease of 16% quarter-over-quarter.
Equity Market Challenges
Equities have been a drag on retail revenues with lower average trading volume at B3 impacting negatively.
Company Guidance
During the First Quarter 2025 Earnings Call, the company reported significant financial metrics, demonstrating robust growth and strategic execution. Client Assets, including AUM and AUA, reached BRL1.8 trillion, marking a 13% year-over-year growth. The active client base expanded to 4.7 million, a 2% increase from the previous year. Gross revenues for the quarter were BRL4.6 billion, showing a 7% growth year-over-year, while ABG grew by 16% year-over-year to BRL1.3 billion. The company achieved a record-high quarterly net income of BRL1.236 million, a 20% increase year-over-year. ROE was reported at 24.1%, expanding by 340 basis points compared to the first quarter of 2024. The capital ratio was comfortably positioned at 19%, with a 130 basis point increase quarter-over-quarter. Additionally, diluted EPS grew by 24% year-over-year, outpacing net income growth, attributed to the execution of a share buyback program. The company also recorded BRL24 billion in net new money, a 79% year-over-year increase, and maintained a retail net new money target of around BRL20 billion per quarter, achieving a 54% growth year-over-year.

XP Financial Statement Overview

Summary
XP exhibits strong revenue and cash flow growth, crucial for its operations in capital markets. Despite challenges in EBIT margins and a high leverage position, robust net income and cash flow metrics support its financial health. A leveraged structure poses some risk, but a high return on equity indicates efficient capital management.
Income Statement
75
Positive
The company demonstrates strong revenue growth, with a notable increase of 25.2% from 2023 to 2025. Despite the high revenue growth, the company faces challenges in profitability, as indicated by a negative EBIT margin. However, the EBITDA margin remains positive, suggesting strong operational cash flow generation, which is vital in the financial industry. The net profit margin is robust due to significant net income figures, enhancing overall profitability.
Balance Sheet
68
Positive
XP shows a solid equity base with an increasing trend in stockholders' equity. The debt-to-equity ratio is relatively high at 2.75 in TTM, indicating a leveraged position that could pose risks if not managed properly. However, the return on equity is impressive at 22.4%, reflecting effective utilization of equity to generate profits. The equity ratio of 6.0% suggests a moderate reliance on equity financing.
Cash Flow
80
Positive
The company's cash flow dynamics are strong, with stable growth in operating cash flow and free cash flow. The operating cash flow to net income ratio of 2.52 highlights efficient cash generation from core operations. Free cash flow growth rate is commendable, ensuring liquidity for future investments and debt servicing. The free cash flow to net income ratio of 2.47 further underscores the ability to convert earnings into cash effectively.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
7.45B7.42B6.53B5.94B6.20B5.02B
Gross Profit
2.30B1.89B1.62B1.10B2.06B1.52B
EBIT
-4.01B-3.92B-3.86B-3.56B-1.93B-615.31M
EBITDA
6.13B6.03B4.81B4.05B4.18B2.62B
Net Income Common Stockholders
4.72B4.51B3.90B3.58B3.59B2.08B
Balance SheetCash, Cash Equivalents and Short-Term Investments
63.93B74.91B54.41B41.30B36.22B22.05B
Total Assets
349.97B347.46B249.04B192.03B139.34B96.03B
Total Debt
57.87B115.13B68.56B35.52B28.21B32.12B
Net Debt
49.65B109.52B64.62B31.97B25.72B30.17B
Total Liabilities
328.92B327.41B229.59B174.99B124.92B85.13B
Stockholders Equity
21.04B20.04B19.45B17.04B14.42B10.89B
Cash FlowFree Cash Flow
11.65B10.85B7.93B1.68B-4.37B1.22B
Operating Cash Flow
11.89B11.18B8.13B1.80B-4.02B1.51B
Investing Cash Flow
-1.10B-1.67B538.81M-371.28M-1.15B-582.01M
Financing Cash Flow
-5.57B-5.78B-4.39B-200.30M6.64B788.71M

XP Technical Analysis

Technical Analysis Sentiment
Positive
Last Price19.64
Price Trends
50DMA
16.93
Positive
100DMA
15.63
Positive
200DMA
15.46
Positive
Market Momentum
MACD
0.78
Positive
RSI
61.04
Neutral
STOCH
58.78
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For XP, the sentiment is Positive. The current price of 19.64 is above the 20-day moving average (MA) of 19.33, above the 50-day MA of 16.93, and above the 200-day MA of 15.46, indicating a bullish trend. The MACD of 0.78 indicates Positive momentum. The RSI at 61.04 is Neutral, neither overbought nor oversold. The STOCH value of 58.78 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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
80
Outperform
$6.28B11.7523.87%2.33%26.02%142.79%
XPXP
78
Outperform
$10.40B12.5621.71%3.29%-2.79%1.33%
75
Outperform
$8.44B39.0816.25%1.34%7.22%-15.53%
SFSF
72
Outperform
$9.96B18.1811.48%1.93%12.85%20.21%
JEJEF
67
Neutral
$11.05B18.096.38%3.06%16.62%139.24%
67
Neutral
$9.23B27.5228.10%47.17%0.09%
64
Neutral
$12.93B9.707.85%78.03%12.07%-7.83%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
XP
XP
19.64
3.40
20.94%
JEF
Jefferies
52.20
8.31
18.93%
MKTX
Marketaxess Holdings
225.25
28.53
14.50%
SF
Stifel Financial
95.37
16.80
21.38%
VIRT
Virtu Financial
41.12
18.33
80.43%
FRHC
Freedom Holding
147.05
65.49
80.30%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.