SÃO PAULO - XP Inc. (NASDAQ:XP), a prominent financial services platform in Brazil, has announced that its board of directors approved a new share repurchase program. The company may buy back up to R$1.0 billion (one billion Brazilian Reais) of its Class A common shares. The repurchases are permitted to occur on the open market or through privately negotiated transactions from November 20, 2024, until the earlier of the program's completion or November 20, 2025, depending on market conditions.
The program's implementation will be subject to market prices and other influencing factors, including general business and market conditions. The repurchase program does not require XP to purchase any particular number of shares and may be adjusted, extended, modified, or discontinued by the company at any time.
XP plans to fund the repurchases from its existing cash reserves. The board has also authorized the management to engage a broker to execute the repurchases on behalf of the company, which may be conducted in accordance with the safe harbors provided by SEC Rules 10b-18 and/or 10b5-1.
This strategic move is part of XP's broader mission to transform the financial industry landscape in Brazil by offering low-fee financial products and services, promoting financial education, and providing access to a wide range of financial services. The company aims to empower clients through the development of new financial products and technology applications, coupled with a commitment to high-quality customer service.
The timing, number, and value of shares repurchased will be contingent on a variety of factors, including regulatory constraints and alternative investment opportunities. It's important to note that the information in this article is based on a press release statement from XP Inc. and should not be viewed as an endorsement of the company's plans or expected outcomes.
In other recent news, Brazil's central bank has amplified its monetary tightening measures, prompting economists to adjust their predictions for the country's peak borrowing costs. After a recent rate hike, the Selic benchmark rate was increased by 50 basis points to 11.25%, with the possibility of further hikes not being dismissed.
This acceleration in rate hikes is a response to persistently high inflation, which the bank now projects to hit 3.6% in the second quarter of 2026, exceeding the official target of 3%. These estimates hinge on the assumption that rates will peak at 12.5% next year.
In light of these recent developments, financial institutions have revised their forecasts. XP, a Brazil-based financial services company, now expects the Selic rate to reach 13.25% at the end of the tightening cycle, marking an increase from their previous prediction of 12%. UBS BB also adjusted its forecast, predicting the Selic to peak at 12.75% in March, up from their previous estimate of 12.25% for January.
JP Morgan, too, has revised its projection, setting the terminal Selic rate at 13%. The firm initially expected a coordinated global easing to alleviate exchange rate pressures, but now views the global environment as more uncertain, with less easing abroad likely to uphold a more depreciated real than initially anticipated.
InvestingPro Insights
XP Inc.'s recent announcement of a share repurchase program aligns with the company's ongoing strategy to enhance shareholder value. According to InvestingPro data, XP's market capitalization stands at $8.93 billion, reflecting its significant presence in the Brazilian financial services sector.
An InvestingPro Tip highlights that management has been aggressively buying back shares, which is consistent with the newly announced repurchase program. This move could be seen as a sign of confidence in the company's future prospects and an effort to boost shareholder returns.
The company's financial health appears robust, with a revenue of $2.82 billion over the last twelve months as of Q2 2023, showing a strong growth of 22.31% during this period. XP's profitability is also noteworthy, with a gross profit margin of 69.89% and an operating income margin of 29.49% for the same period.
Another InvestingPro Tip indicates that XP is trading at a low P/E ratio relative to its near-term earnings growth. With a P/E ratio of 12.29 and a PEG ratio of 0.65, the stock may be considered undervalued by some investors, especially given its growth prospects.
It's worth noting that XP's stock price has fallen significantly over the last three months, with a total return of -15.7%. This decline could present an opportunity for investors, particularly in light of the company's solid financials and the new share repurchase program.
For readers interested in a more comprehensive analysis, InvestingPro offers 9 additional tips for XP Inc., providing a deeper understanding of the company's financial position and market outlook.
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