Here’s Why BofA Has a Hold Rating on XP Inc. (XP)

Core Viewpoint - XP Inc. is considered an undervalued stock with significant upside potential, with a Hold rating and a price target of $22 set by Bank of America Securities [1]. Group 1: Strategic Priorities and Earnings Growth - CEO Thiago Maffra has outlined strategic priorities for 2026, focusing on standardizing Independent Financial Advisors' services, developing alternative distribution channels, and expanding premium services to lower-tier customers [2]. - Earnings growth for the year is expected to be around 8%, limited by constrained revenue yield growth and anticipated increased investment in the B2C channel [2]. - Short-term earnings are expected to remain limited due to elevated interest rates and necessary investments, although long-term engagement and customer experience improvements are anticipated to benefit earnings [3]. Group 2: Financial Performance - In fiscal Q3 2025, XP Inc. reported a revenue increase of 17.04% year-over-year, reaching $875.65 million, surpassing estimates by $11.84 million [4]. - The earnings per share (EPS) for the same quarter was $0.46, slightly exceeding consensus estimates by $0.01 [4]. - The revenue growth was primarily driven by a 12% year-over-year increase in total client assets, which reached R$1.4 trillion in Q3 [4]. Group 3: Company Overview - XP Inc. operates as a technology-driven financial services platform in Brazil, offering a variety of low-fee products and services to retail and institutional clients [5]. - The company's business encompasses wealth management, securities brokerage, investment management, and corporate services, including M&A advisory [5].