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Key Takeaways
- XP fell 52% today after Lula won Brazil’s presidential runoff. Bradesco fell 28%, Itaú 25%], Patria 16% and Santander Brasil 12%.
- XP’s selloff looks much bigger than any hit to its business so far.
- Analysts’ consensus from before the vote has XP’s normalized earnings per share rising about 43% from 2025 to 2028.
- Flávio Bolsonaro’s bid to annul the result and a weaker real are the risks to watch.
XP (XP) is down 52% today after Luiz Inácio Lula da Silva won Brazil’s presidential runoff on Sunday. Markets weren’t ready for that result.
Brazil’s banks and investment firms fell with it: Banco Bradesco (BBD) is down 28%, Itaú Unibanco (ITUB) 25%, Patria Investments (PAX) 16% and Santander Brasil (BSBR) 12%.
“Impossible to recognize”
Lula took 51.8% of the vote to Flávio Bolsonaro’s 48.2%. No Brazilian candidate had ever lost the first round and then won the runoff.
Bolsonaro isn’t conceding. “It is impossible to recognize the election results, given the circumstances under which things unfolded,” he told journalists. He plans to ask for the result to be annulled. Analysts said that’s unlikely to work with Lula ahead by more than 4 million votes.
The Bolsonaro trade unwinds
Investors piled into Brazil after Bolsonaro led the first round early this month, betting on a market-friendly government. Itaú’s price-to-tangible-book value shows how far that went…
It peaked at 3.0x on Oct. 6, days after the first round. Its five-year average is 1.9x. Today’s drop takes it closer to 2x, about where it usually trades.
XP fell much harder: nearly twice the iShares MSCI Brazil ETF’s 25% drop before the open. Bradesco and Itaú fell about as much as the ETF, and Santander Brasil and Patria fell less than half as much as XP.
TIKR tracks 13 analysts on XP. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on XP, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See XP’s Analyst Ratings
XP’s business didn’t change overnight
Nothing about XP’s business changed on Sunday. Analysts’ consensus has its normalized earnings per share rising from R$9.81 in 2025 to R$14.05 in 2028, about 43% higher…
Those estimates date from Oct. 21, before the vote. The real could fall about 10%, which would shrink those earnings in dollars, but that’s a fraction of today’s drop.
At Friday’s close, XP traded at 12.9x forward earnings, right around its five-year average of 12.7x…
Today’s drop takes it to around 7x, about where it bottomed in June.
A lot of bad news in the price
My take: XP’s selloff is overdone. Itaú has given back its Bolsonaro premium and is back near its usual multiple. XP is priced as if its earnings were about to halve, and nothing in the estimates says they will.
Of course, Bolsonaro’s challenge could keep markets on edge, and Lula still has to work with a right-wing Congress. XP’s third-quarter report will be the next real look at whether Brazilian investors are pulling money out.
So what is XP stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
