XP Inc. Q2: Better, But Not Way Better (Upgrade)

XP Inc. reported Q2 revenue up 8% and EBT up 15%, sustaining 22.5% ROE, alongside ecosystem progress with fee-based services now at 26% of customers. Net new money inflows accelerated, particularly from retail, though competition and macro risks remain. The stock’s ~8x earnings multiple is viewed as reasonable but not compelling versus peers.

Analysis

XP is becoming more of a distribution-and-advisory platform than a pure brokerage, which is important because that shifts earnings quality away from transaction beta and toward stickier fee streams. The market should give some credit for that, but at ~8x earnings the equity still looks like a fairly efficient way to own a Brazil retail-financials recovery, not an obvious mispricing. The upside case depends on cross-sell and customer monetization compounding faster than the cost of acquiring those customers; if either slows, the multiple can stay pinned.

The bigger second-order issue is that XP’s growth engine is tied to retail risk appetite and local market confidence, both of which are vulnerable to rate shocks and weaker equity performance. If Brazilian real rates stay restrictive or drift higher, the most cyclical part of the inflow mix can slow quickly, pressuring assets gathered and take-rate expansion before headline revenue shows it. Competitors with broader product shelves and stronger banking balance sheets can also defend share by compressing pricing, which makes XP’s fee expansion more fragile than the top-line growth suggests.

Contrarian view: the consensus may be underestimating operating leverage if fee-based penetration keeps rising for another 2-3 quarters, especially if local rates ease and retail re-risking resumes. In that scenario, XP can re-rate modestly from a ‘reasonable’ multiple to a premium asset-light franchise, but the market needs proof that inflow quality is durable rather than cyclical. Falsifier: two consecutive quarters of slowing net new money or deterioration in fee-based mix would argue the current valuation is already fair to rich.

Key Decisions for Investors

• No outright long here; use XP as a watchlist name until the next 1-2 quarters confirm that fee-based mix and net new money are still accelerating, not just normalizing.
• If forced to express a view, prefer a relative-value short XP vs long BTG Pactual-style diversified financials on any rally: XP has more reliance on retail risk appetite, while broader platforms can absorb a slower flow backdrop better over the next 3-6 months.
• For a tactical bullish expression, buy a modest amount of XP on a pullback only if Brazilian rates or local equities improve; target a 10-15% rebound over 3-6 months, but cut if inflows stall for a second quarter.
• Set a hard alert on net new money and fee-based customer penetration in the next print: if either disappoints, treat the stock as a multiple trap and rotate into better-quality financials.
• If the macro turns supportive, a call spread in XP is cleaner than stock given the limited valuation upside from 8x earnings; otherwise stay neutral and preserve optionality.