XP Inc. (NASDAQ:XP) is among the under-the-radar dividend stocks benefiting from AI. Analysts at BofA have reiterated their ‘Neutral’ rating on XP Inc. (NASDAQ:XP), while raising the price target to $22 from $19, reflecting a potential upside of nearly 17%. In addition to this, the firm revised its revenue growth guidance for the company, while maintaining its earnings estimates unchanged. The price upswing is driven by a shift in its valuation basis from year-end 2025 to 2026. XP Inc. (NASDAQ:XP) is one ...

Core Viewpoint - Banco BTG Pactual SA has successfully diversified its revenue streams, transitioning from a focus on sales and trading to a more balanced portfolio that includes significant growth in lending, asset management, and wealth management [1][2][3]. Revenue Diversification - Lending has become a 7.6 billion-real ($1.4 billion) business, surpassing sales and trading for the first time [2]. - The bank's assets under management have increased more than fivefold, while wealth under management has more than doubled, contributing to nearly a quarter of total revenue [2]. Strategic Growth and Acquisitions - BTG has expanded its customer base through acquisitions, enhancing its wealth and asset management business and reigniting global ambitions [4]. - Recent acquisitions include HSBC's operations in Uruguay for $175 million and various businesses in Latin America and beyond, such as FIS Privatbank in Luxembourg and M.Y. Safra Bank in New York [6][7]. Market Performance - BTG's shares have risen approximately 70% this year, outperforming other major banks in Latin America, with a return on equity of 27% in the second quarter [5]. Business Model and Partnerships - The bank's partnership model allows senior partners to buy shares at book value, fostering a nimble decision-making process [12]. - BTG has established a digital retail platform and a network of independent investment advisers, growing to 20 dedicated offices in Brazil and 170 third-party firms [16][17]. Competitive Positioning - BTG has become a prominent buyer of banking assets, acquiring both thriving and distressed wealth management businesses [8][9]. - The bank aims to compete with major players like Itau, having recently become the second-largest Latin American bank by market value [18][19]. Challenges and Future Outlook - Despite its success, concerns about transparency and corporate governance have been raised, particularly regarding the complexity of its shareholding structure [22][23]. - The bank is cautious in its lending practices amid high interest rates and economic uncertainty in Brazil, focusing on supply-chain financing [15].

Core Viewpoint - The article emphasizes the importance of value investing and highlights XP (XP) as a strong stock opportunity based on its favorable valuation metrics and strong earnings outlook [2][8]. Group 1: Company Overview - XP currently holds a Zacks Rank of 1 (Strong Buy) and an "A" grade for Value, indicating it is a top pick in the market [4]. - The stock has a P/E ratio of 8.63, significantly lower than the industry average of 25.23, suggesting it may be undervalued [4]. - XP's Forward P/E has fluctuated between 1.97 and 12.34 over the past year, with a median of 9.27 [4]. Group 2: Valuation Metrics - The company has a PEG ratio of 0.64, compared to the industry average of 1.38, indicating strong growth potential relative to its valuation [5]. - XP's P/B ratio stands at 2.42, which is attractive compared to the industry's average P/B of 4.04 [6]. - The P/CF ratio for XP is 9.83, significantly lower than the industry average of 22.27, further supporting the notion of undervaluation [7]. Group 3: Investment Potential - The combination of XP's strong valuation metrics and positive earnings outlook positions it as an impressive value stock at the moment [8].

Group 1 - The investment strategy focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective [1] - The approach does not prioritize market-driven dynamics or future price action, instead emphasizing long-term earnings power and competitive dynamics [1] - The majority of recommendations will be holds, indicating a cautious approach to market conditions and a belief that only a small fraction of companies are suitable for buying at any given time [1] Group 2 - The articles aim to provide valuable information for future investors while maintaining a healthy skepticism towards a generally bullish market [1]

Core Insights - XP Inc. is a leading investment platform in Brazil with a growing assets under management (AUM) base that ensures recurring fee revenue [1] Group 1: Company Overview - XP Inc. operates a scalable investment platform in Brazil, highlighting its operational efficiency [1] Group 2: Market Position - The company maintains a broad and expanding AUM, which is crucial for its revenue model [1]

Core Insights - XP Inc. has established itself as a leading player in Brazil's financial industry, demonstrating significant growth potential despite already solid Q2 results [1] Company Performance - XP Inc. reported strong results in Q2, indicating ongoing growth and resilience in the financial sector [1] Market Position - The company is recognized as revolutionary within Brazil's financial landscape, suggesting a strong competitive advantage and innovative approach [1]

Core Viewpoint - XP Inc.A reported quarterly earnings of $0.43 per share, matching the Zacks Consensus Estimate, and showing an increase from $0.39 per share a year ago [1] - The company posted revenues of $786.31 million for the quarter, missing the Zacks Consensus Estimate by 5.8% and down from $809.53 million year-over-year [2] Financial Performance - XP Inc.A's earnings of $0.43 per share were in line with expectations, with a previous quarter surprise of +2.63% when it reported $0.39 per share against an expectation of $0.38 [1] - The company has surpassed consensus revenue estimates two times over the last four quarters, but this quarter's revenue was below expectations [2] Stock Performance - XP Inc.A shares have increased approximately 48.2% since the beginning of the year, significantly outperforming the S&P 500's gain of 9.7% [3] - The stock's immediate price movement will depend on management's commentary during the earnings call [3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.45, with expected revenues of $870.3 million, and for the current fiscal year, the EPS estimate is $1.72 on revenues of $3.4 billion [7] - The estimate revisions trend for XP Inc.A was favorable ahead of the earnings release, resulting in a Zacks Rank 1 (Strong Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Financial - Miscellaneous Services industry, to which XP Inc.A belongs, is currently ranked in the top 18% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

Financial Data and Key Metrics Changes - Client assets (AUM and AUA) reached BRL 1,900 billion, reflecting a 17% year-over-year growth [3] - Active clients increased to 4.7 million, marking a 2% growth year-over-year [4] - Gross revenues for the quarter were BRL 4.7 billion, a 4% year-over-year increase [4] - Net income achieved a record high of BRL 1.321 billion, representing an 18% year-over-year growth [4] - Return on equity (ROE) was 24.4%, with a 223 basis points expansion compared to the same quarter last year [5] - Diluted EPS grew by 22% year-over-year, driven by a share buyback program [6] Business Line Data and Key Metrics Changes - Retail revenue posted BRL 3.5 billion, a 9% growth year-over-year, primarily driven by fixed income and new retail verticals [23] - Fixed income revenue grew by 20% year-over-year, reaching BRL 1 billion [24] - Corporate revenues increased by 14% year-over-year, while issuer services saw a 30% decline due to tough comparisons from the previous year [25] Market Data and Key Metrics Changes - The company reported a solid GCM pipeline for the second half of the year, indicating potential for revenue growth despite current challenges [8] - The corporate lending strategy is evolving, with a focus on originating credit to sell, rather than holding it on the balance sheet [46] Company Strategy and Development Direction - The company aims to enhance its ecosystem by integrating retail, institutional, and corporate divisions to generate investment opportunities [10] - There is a focus on diversifying channels and expanding the sales team to improve client engagement and product offerings [11] - The company is committed to maintaining a sustainable revenue model and long-term growth, positioning itself as a defensive business [11] Management's Comments on Operating Environment and Future Outlook - The management acknowledged that 2025 has been more challenging than anticipated, requiring increased efforts to maintain profitability [3] - There is confidence in achieving retail net new money averaging BRL 20 billion per quarter for the remainder of the year [9] - The management expects to see improvements in the corporate lending strategy and overall revenue growth in the second half of the year [62] Other Important Information - The company has a share buyback program of BRL 1 billion to be executed until next year [6] - The BIS ratio is at a comfortable level of 20.1%, indicating strong capital management [32] Q&A Session Summary Question: Capital generation and dividends - The management indicated that net income is growing faster than RWA, and they expect to distribute more than 50% of net income in dividends and buybacks [37][40] Question: Corporate lending strategy - The management confirmed that corporate lending is important but operates within a defined risk appetite, focusing on originating credit to sell [45][48] Question: Net new money initiatives - The management outlined several initiatives to increase net new money, including channel diversification and enhancing productivity of internal advisers [55][58] Question: Revenue growth and inflows - The management expressed confidence in achieving BRL 20 billion in net new money, citing improvements in the B2B channel and new product offerings [62][66] Question: Corporate portfolio dynamics - The management explained that the corporate credit portfolio is primarily for securitization and selling, and they are adapting to market dynamics affecting corporate net new money [71][72] Question: Non-people related expenses - The management acknowledged a significant increase in non-people expenses due to marketing and technology investments, which are expected to normalize [87][88]

Financial Data and Key Metrics Changes - Client assets, AUM, and AUA reached BRL 1,900 billion, reflecting a 17% year-over-year growth [2] - Gross revenues for the quarter were BRL 4.7 billion, marking a 4% year-over-year increase [3] - EBT decreased by 5% year-over-year to BRL 1.3 billion, primarily due to last year's positive overhead impacts [3] - Net income reached a record high of BRL 1.321 billion, representing an 18% year-over-year growth [3] - ROE was 24.4%, with a 223 basis points expansion compared to the same quarter last year [4] - Diluted EPS grew by 22% year-over-year, driven by the share buyback program [5] Business Line Data and Key Metrics Changes - Retail revenue grew by 9% year-over-year, driven by fixed income and new retail verticals [23] - Fixed income revenue increased by 20% year-over-year, reaching BRL 1 billion [24] - Life insurance written premiums grew by 45% year-over-year, indicating strong growth potential in this segment [15] - Credit card transactions marked BRL 12.4 billion in TPV, an 8% year-over-year increase [15] Market Data and Key Metrics Changes - The corporate and institutional segment saw a net outflow of BRL 6 billion in new money, attributed to higher interest expenses and liquidity constraints [6][7] - The company maintained a 17% market share in the local industry for its broker-dealer operations [18] Company Strategy and Development Direction - The company aims to become the leader in investments in Brazil, focusing on a diversified ecosystem that integrates retail, institutional, and corporate divisions [11][12] - New product offerings and channel diversification are key strategies to enhance client engagement and drive profitability [10][11] - The company is investing in technology and marketing to improve client experience and expand its service offerings [88] Management's Comments on Operating Environment and Future Outlook - The current operating environment is more challenging than anticipated, particularly for investment banking origination activities [7] - Management remains optimistic about a solid GCM pipeline for the second half of the year and expects to achieve retail net new money averaging BRL 1 billion per quarter [8] - The company anticipates that the dynamics of the corporate lending market may continue to impact net new money in the upcoming quarters [72] Other Important Information - The company has a share buyback program of BRL 1 billion to be executed until next year, aligning with its capital distribution plan [5][31] - The BIS ratio stands at a comfortable level of 20.1%, indicating strong capital management [32] Q&A Session Summary Question: Capital generation and dividends - Management indicated that net income is expected to grow faster than RWA, allowing for potential acceleration in dividends and buybacks [36][39] Question: Corporate lending strategy - Management acknowledged the importance of corporate lending but emphasized that growth in this area is aligned with their risk appetite [44][47] Question: Initiatives to increase net new money - Management highlighted channel diversification, new product offerings, and increased productivity of IFAs as key initiatives to drive net new money [55][57] Question: Inflows in the third quarter - Management expressed confidence in achieving BRL 20 billion in inflows, although specific inflow patterns for the quarter were not disclosed [62][67] Question: Corporate portfolio dynamics - Management explained that the corporate credit portfolio is primarily originated for securitization and sale, with current market dynamics affecting net new money [70][72] Question: Non-people related expenses - Management attributed the increase in non-people related expenses to marketing and technology investments, which are expected to continue [88][90] Question: Fee-based model impact - Management noted that while the fee-based model currently represents only 5% of AUC, it is expected to grow, potentially impacting the take rate but increasing the share of wallet [97][99]

Financial Performance - XP Inc's client assets, AUM, and AUA reached R$1.9 trillion, a 17% increase year-over-year[10] - Gross Revenue increased by 4% year-over-year to R$4.7 billion[12] - The company's EBT was R$1.3 billion, a 5% decrease year-over-year[12] - Net Income grew by 18% year-over-year, with a diluted EPS growth of 30% CAGR[15] - The company's ROE was 24.4%, a 223 bps increase year-over-year[14] Retail Investments - Retail Net New Money amounted to R$16 billion[26] - Retail revenue increased by 9% year-over-year to R$3.577 billion[66] - Equities and Fixed Income are the main contributors in Retail revenue[69] Wholesale - Institutional, Corporate, and Issuer Services Gross Revenue reached R$3.619 billion LTM[54] - Investment Banking DCM Volume was R$34 billion[54] Capital Management - The company's BIS Ratio is 20.1%[14, 105] - The company's VaR is R$28 million, or 13 bps of Equity[107]