To The Moon

$XP Inc.(XP)$ $Nu Holdings Ltd.(NU)$ $Itau Unibanco Holding SA(ITUB)$ 🤝📊🇧🇷 XP Ignites Brazil’s Fintech Flywheel: Record Profit, Inflow Surge, And Wholesale Momentum 🇧🇷📊🤝

🎯 Executive Summary

I’m extremely confident this quarter confirms XP’s renewed momentum and marks a structural inflection, positioning it as Brazil’s premier digital investment platform outpacing legacy banks such as $ITUB and $BBDC in a high Selic environment. Q3 delivered record net income of R$1.33 billion, up 12% YoY and 1% sequentially, supported by R$4.66 billion in net revenue, up 8% YoY and 5% QoQ. Total client assets reached R$1.425 trillion, rising 12% YoY and 4% QoQ.

The catalyst was the explosive rebound in total net inflows, which surged to R$29 billion from R$10 billion in Q2, a 204% sequential jump that directly eliminated the key concern hanging over Q2. Retail net inflow reached R$20 billion, hitting management’s target and reinforcing XP’s core growth engine. Corporate and Issuer Services became the standout performer with revenue up 33% QoQ and 32% YoY, validating the DCM pipeline and strengthening XP’s position against fintech peers such as $NU.

Profitability remains high although people costs rose 17% YoY, driven partly by a 34% jump in bonuses tied to investment banking outperformance. XP reinforced long term confidence with a new R$1 billion buyback programme and a R$500 million dividend supported by a BIS ratio of 21.2%. This quarter reflects a broader structural trend where global flows into $EWZ increasingly favour digital platforms over traditional banks, and XP continues to sit on the right side of that shift.

💰 Financial Performance Breakdown

Net revenue was R$4.66 billion, rising 8% YoY and 5% QoQ. Gross profit reached R$3.18 billion with a gross margin of 68.2%. SG and A expenses rose 14% YoY to R$1.662 billion. People costs increased 17% YoY to R$1.149 billion, including the 34% bonus spike. Non people expenses were R$513 million and declined 5% sequentially. Depreciation and amortisation totalled R$76 million.

Net income reached a record R$1.33 billion, up 12% YoY. Diluted EPS was R$2.47, up 13% YoY and flat QoQ. Total client assets ended the quarter at R$1.425 trillion.

Segment performance

Retail revenue: R$3.70 billion, up 4% QoQ

Institutional revenue: R$340 million, down 1% QoQ

Corporate and Issuer Services: R$729 million, up 33% QoQ and 32% YoY

Key KPIs

Annualised Retail Take Rate: 1.24%

Active Clients: 4.75 million

Expanded Loan Portfolio: R$67 billion

Cards TPV: R$13.1 billion

ROAE: 23.0%

ROTE: 28.0%

XP completed R$842 million in buybacks and authorised a new R$1 billion repurchase programme with a R$500 million dividend. The BIS ratio of 21.2% supports strong capital returns within the long term 16 to 19% target for 2026.

🛠️ Strategic Headwinds and Execution Risk

Margins compressed slightly. EBT margin fell 103 bps to 28.5% and net margin declined 112 bps to 28.5%. Elevated people costs from new hires and investment banking bonuses created short term pressure. Management expects margins to remain flattish as XP prioritises growth investments in AI capability, SMB expansion, and advisor productivity.

Retail monetisation softened with the Retail Take Rate dipping to 1.24%. Fixed income revenue fell 7% sequentially as clients continued to favour daily liquidity products. These now account for 45% of new allocations compared with 25% a year ago and carry lower spreads than longer duration bonds. XP is selling higher volumes for lower unit revenue which fits the current Selic environment.

The advisor network remained flat at 18.2 thousand, down 1% YoY. XP continues to remove lower performing IFAs, reinforce its Triple A advisor cohort, and grow its internal advisor base. Execution risk involves potential issuance timing shifts from tax changes and slower loan growth amid a high rate backdrop, although long term guidance and BIS strength support XP’s countercyclical strategy.

🧠 Analyst and Institutional Sentiment

Analyst sentiment is constructive. Morgan Stanley raised its target to $26 with a Buy view. UBS maintains a Buy rating with a $23 target. Consensus sits near $23 with a band between $21 and $27 which implies high teens to low 20s % upside from current levels.

Institutional ownership remains strong with long term holders maintaining conviction. The expanded buyback and dividend signal management’s confidence in sustained capital generation. XP benefits from global flows into $EWZ which increasingly favour digital platforms over incumbents such as $ITUB and $BBDC. Post earnings, call flow was net positive which reinforces the bullish tilt.

📉📈 Technical Setup

On the 4H chart, I see XP trading within a rising channel that has been intact since the October low near 16.20. The move into 19.80 created a micro double top and price has since pulled back into the centre of the Keltner structure. This is a consolidation phase, not a breakdown. The broader rhythm shows impulsive rallies followed by controlled retracements.

EMA interactions

EMA 13 is above price which confirms short term pressure. EMA 21 is being tested from underneath. EMA 55 continues to rise and has consistently acted as cycle support during prior pullbacks. When XP slips below both EMA 13 and EMA 21, it typically consolidates then reclaims the trend which aligns with the current structure.

Keltner channels (240 smoothing)

Upper band: around 20.20

Mid band: around 18.50

Lower band: around 17.20

Price is stabilising around the mid Keltner band which is constructive. Mid band holds have historically led to renewed upside while mid band breakdowns have pressed price toward 17.20.

Bollinger bands

The bands remain wide which signals elevated volatility. Price has reverted toward the middle band and is stabilising. This reflects a volatility compression structure rather than distribution.

Support levels I identify

18.20

17.60

16.20

Resistance levels I identify

19.50

20.20

20.60

Trend remains intact. I see a channel retracement with momentum cooled but structural integrity preserved. The technicals support a path toward a $23 retest if volume expands.

🌍 Macro and Sector Context

The high Selic environment continues to steer clients toward short duration fixed income which compresses take rates but strengthens inflow consistency. A future rate cycle turn would unlock rotation into higher margin products. XP outperforms peers on inflow momentum and wholesale execution. Corporate revenue growth of 33% QoQ contrasts with slower wholesale performance at $ITUB and $BBDC. Digital adoption and advisor productivity tools driven by AI continue to expand XP’s competitive edge. Global flows into Brazil via $EWZ increasingly tilt toward innovative digital platforms rather than traditional banks.

📊 Valuation and Capital Health

XP remains attractively valued.

Trailing P E near 11x

Forward P E around 9 to 10x

Price to free cash flow around 5x

Price to sales around 3x

Price to book near 2.3 to 2.4x

PEG ratio around 0.7

ROAE of 23% and ROTE of 28% highlight powerful capital compounding. With a BIS ratio of 21.2%, XP maintains significant room for continued buybacks and dividends while investing in long term growth. This valuation profile stands in contrast to higher multiple fintech names such as $NU and sits attractively relative to large banks on an EV EBITDA basis.

⚖️ Verdict and Trade Plan

I am maintaining XP as a Buy based on structural inflow momentum, wholesale strength, attractive valuation, and disciplined capital allocation.

Swing entry zone

17.50 to 18.20

Stop or invalidation

A close below 16.00

Targets

Base target: $23.00

Stretch target: $26.00

I want to see Retail inflows hold above R$20 billion per quarter, ongoing strength in Corporate and Issuer Services, and stabilisation in people cost growth. A breakout above 20.60 with volume confirmation would set up the next leg higher.

🏁 Conclusion

This quarter confirms XP as a structural compounder capable of growing across cycles. Record profitability, a powerful rebound in net inflows, wholesale leadership, and disciplined capital returns create a compelling long term setup. The market may focus on margin pressure. I am focused on platform strength, trend durability, and a valuation that rewards conviction. This is not just recovery. It is a structural rerating in motion.

📌 Key Takeaways

• Total net inflows surged to R$29 billion from R$10 billion, up 204% QoQ

• Retail net inflow hit R$20 billion, meeting management’s target

• Corporate and Issuer Services grew 33% QoQ and 32% YoY

• People costs rose 17% YoY including a 34% bonus spike

• BIS ratio at 21.2% supports a R$1 billion buyback and R$500 million dividend

• Technical trend remains intact with support at 18.20, 17.60, and 16.20

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