Key Takeaways
- XP (XP) fell approximately 49% in the month ended November 6, closing at $15.14 after Brazil’s presidential election triggered a sharp selloff in financial stocks.
- StoneCo (STNE) declined 29% on October 26, highlighting the broader pressure on Brazilian financial companies.
- UBS maintained its Buy rating on XP but lowered its price target to $23, implying approximately 52% upside from the November 6 closing price.
- XP traded at approximately 7.0x forward earnings, below its five-year average of 12.6x, while analysts projected earnings growth through 2028.
What Happened?
XP (XP) stock fell approximately 49% in the month ended November 6, with most of the decline occurring after Luiz Inácio Lula da Silva unexpectedly won Brazil’s presidential runoff election.
Lula secured 51.79% of the vote on October 25, defeating Flávio Bolsonaro and disappointing investors who had anticipated a more market-friendly administration.
XP plunged approximately 48% on October 26, reaching a 52-week low, while StoneCo (STNE) declined 29% as investors reassessed Brazil’s economic outlook.
XP had surged approximately 34% on October 5, while UBS raised its price target from $25 to $37 on October 8 amid growing optimism surrounding Brazilian financial stocks.
Bank of America noted that XP had doubled from its August lows before the election.
Citi downgraded XP from Buy to Neutral on October 27, lowering its price target from $25 to $15.
Morgan Stanley and Santander also downgraded the stock, reflecting concerns about future investment flows, equity-market activity, and trading volumes.
These risks matter because XP generates revenue partly from client assets, investment products, and trading activity.
During XP’s second-quarter earnings call, CEO Thiago Maffra said that when trading “volumes pick up, we make more money,” highlighting how stronger activity in its institutional and retail trading businesses can support revenue.
Despite the uncertainty, UBS maintained its Buy rating on November 5 while reducing its price target from $37 to $23, implying approximately 52% upside from XP’s November 6 closing price of $15.14.
Goldman Sachs also maintained its Buy rating on November 12, although it lowered its price target from $36 to $31, highlighting continued optimism among some analysts despite the election-related uncertainty.
Is XP Stock Undervalued or Overvalued?
At approximately $15 per share, XP appears potentially undervalued, although Brazil’s political uncertainty and the risk of weaker investment activity help explain its discounted valuation.
According to TIKR estimates dated October 29, normalized EPS was projected to increase from R$9.81 in fiscal 2025 to R$10.90 in 2026, representing approximately 11% growth.
Analysts expected normalized EPS to reach R$13.75 by fiscal 2028, approximately 40% above fiscal 2025 levels.
XP traded at approximately 7.0x forward earnings on November 6, compared with its five-year average of 12.6x, suggesting a substantial discount to its historical valuation.
The multiple also reached a five-year low of approximately 6.5x on November 2.
UBS’s $23 target implies approximately 10.6x forward earnings, assuming estimates remain unchanged, still below XP’s historical average.
However, Citi’s $15 target suggests limited upside, while weaker client inflows, declining trading volumes, and downward earnings revisions could justify a prolonged discount.
According to XP’s investor-relations website, third-quarter results are scheduled for November 16 after the U.S. market closes.
Although those results cover the period before the election, management’s commentary could provide insight into its post-election outlook.
Over the next 12 months, XP’s recovery will depend on client growth, trading activity, and earnings revisions. Stronger fundamentals could support a rebound toward UBS’s target, while continued weakness could limit upside.
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!
