Morgan Stanley cuts XP Inc. stock rating on Brazil outlook concerns
Morgan Stanley downgraded XP Inc. (NASDAQ:XP) to Equalweight, cutting its price target to $19.00 from $23.00. Analyst Jorge Kuri cited Brazil's post-election outlook as undermining the lower-rates thesis. The stock has fallen 45% in a week, trading at $16.09. Morgan Stanley also downgraded B3 (B3SA3.SA) to Equalweight. XP's Q2 2026 earnings beat estimates, with adjusted EPS of $2.67 and revenue of $4.88 billion, but the stock declined due to investor caution.
How this was made
The 30-second read
Why it matters
The downgrade could trigger short‑selling and reduce inflows into XP and B3, affecting exposure to Brazilian capital markets.
Market read
Analyst downgrade adds fresh negative catalyst for XP and B3, likely prompting price declines.
What to watch
Potential resilience in XP's earnings despite macro headwinds and its recent earnings beat.
Background
Morgan Stanley's rating change follows Brazil's presidential runoff and concerns over fiscal policy continuity.
Ticker impact
Morgan Stanley downgraded XP Inc. to Equalweight and cut its price target to $19, citing Brazil's post‑election outlook.
likely downside as investors price in reduced earnings visibility and higher cost of capital
The downgrade is a fresh, material change to the stock's valuation outlook.
Market effects
Highlights heightened risk perception for Brazil‑focused financial services.
May weigh on broader Brazil equity sentiment amid post‑election uncertainty.
Limited to investors with exposure to emerging‑market financial stocks.
Counterpoint
Some investors may view the downgrade as over‑reacting to political risk, seeing upside potential if Brazil stabilises.
Key entities
- AnalystMorgan Stanley
Equity research firm issuing the downgrade.
- AnalystJorge Kuri
Morgan Stanley analyst covering XP.
