Credit Suisse downgrades XP shares, which plummet at Nasdaq

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After XP Inc., Brazil’s largest independent brokerage, reported weak Q4 results, Credit Suisse downgraded the company’s recommendation to “underperform” (below the market average) and lowered the target price from USD 27 to USD 15. 

It is not the first time the bank has lowered the brokerage firm’s target price below its peers. The movement is linked to external factors, such as the maintenance of high benchmark interest rates — which makes investors migrate to fixed-income products, better for retail banks — and also to internal issues, such as the fact that the institution is seeing a worsening of XP’s results.

XP ended Q4 2022 with a net income of BRL 783 million, 24 percent below that reported between July and September and 21 percent lower than 12 months prior. The company’s net earnings reached BRL 3.58 billion across the entirety of 2022, practically no change from the BRL 3.59 billion of the previous year.

Also this week, XP co-founder Guilherme Benchimol sent a harsh letter to his army of over 12,000 autonomous agents asking for “a return to basics” for more robust results. 

As Credit Suisse points out, the brokerage firm’s monthly net funding also fell last year compared to 2021, from BRL 44 billion to BRL 39 billion on average.

The bank forecasts net 2023 income for XP of BRL 3.6 billion, below the company’s projections of between BRL 3.8 and BRL 4.4 billion.

As a result of the lower-than-expected report and Credit Suisse’s new rating, the company’s shares fell sharply since Nasdaq’s opening bell. By 1 pm EST, XP shares dropped 18.85 percent to USD 12.90.

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