Why XP (XP) Is Up 13.5% After Buyback and Dividend Announcement and What's Next

• Earlier this month, XP Inc. declared a US$0.18 per Class A share cash dividend, announced the retirement of nearly 11 million Class A shares, and completed a new buyback program totaling approximately R$1 billion, funded by existing cash reserves.
• These shareholder-focused actions accompanied the release of XP's third quarter results, highlighting increased revenue and net income alongside a rise in diluted earnings per share compared to the prior year.
• We'll explore how XP's newly completed share buyback and dividend may influence its investment narrative and outlook from here.

Find companies with promising cash flow potential yet trading below their fair value.

XP Investment Narrative Recap

To own XP stock, investors need to believe in Brazil’s expanding middle class, rising personal savings rates, and the migration toward digital investment platforms. The recent share buyback and dividend announcements reinforce XP’s capital return priorities, but do not significantly shift the most important near-term catalyst: growing retail client assets. The biggest risk, ongoing pressure on revenue growth and margins from increased competition in corporate and SME segments, remains largely unaltered by these shareholder actions.

Among the latest updates, the completed share repurchase program stands out: XP has bought back and retired nearly 11 million Class A shares using BRL 1,000 million in existing cash. This move reduces share count, which can support earnings per share metrics, but may have limited impact on the critical catalyst of net new money inflows from retail clients given the current competitive and regulatory environment.

Yet, while buybacks often draw headlines, investors should also be aware that XP’s fee structures face pressure from incumbent banks and fintech rivals, which means ...

Read the full narrative on XP (it's free!)

XP's narrative projects R$25.2 billion revenue and R$6.8 billion earnings by 2028. This requires 14.5% yearly revenue growth and an earnings increase of R$1.9 billion from R$4.9 billion today.

Uncover how XP's forecasts yield a $23.17 fair value, a 18% upside to its current price.

Exploring Other Perspectives

Five fair value estimates from the Simply Wall St Community span from US$17.95 to US$23.17. Competitive threats to fee and margin stability remain a talking point for many, fueling wide differences in investor opinion, see how your view compares.

Explore 5 other fair value estimates on XP - why the stock might be worth 9% less than the current price!

Build Your Own XP Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your XP research is our analysis highlighting 4 key rewards that could impact your investment decision.
• Our free XP research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate XP's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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