Brazilian financial services provider XP is Tuesday's IBD 50 Stocks To Watch pick. The fintech stock is in a buy zone after rebounding from a key chart level following the company's earnings report.
XP offers low-fee financial services, including trading platforms, stock, options and futures brokerage services, variable and fixed income products. It also offers credit cards.
XP ranks No. 5 out of 32 stocks in IBD's investment banking and brokers group. The group is ranked a low No. 113 out of 197 amid a downtrend in financials.
Financial Services Stock In The Buy Zone
Shares of XP are in a 10% buy zone reaching to 26.93, after the stock pulled back to its 10-week moving average last week and found support. The buy area starts at 24.48. But remember that buying stocks is quite risky right now that the market is in a correction.
Shares gained 150% since its 10.30 low on March 15, so its pause starting in July can be beneficial.
The stock broke out of a double-bottom base in May. Its first follow-on formation was a three-weeks tight pattern in late June and early July.
The stock jumped 5.8% in heavy volume after Credit Suisse upgraded the stock to neutral from underperform, and raised its price target to 26 from 15 on July 20. The move started a three-day rally that produced a 13% gain.
IBD SwingTrader identified a short-term swing trade in July, before the stock started its pullback.
The stock got a 2.1% lift Monday after Citigroup raised its price target to 30 from 20 and maintained its buy rating on the stock. It helped the stock find support at the 10-week line and create its new buy zone.
Shares have a long way to go to get back to the all-time of 53.08 from Aug. 30, 2021.
Earnings Top Forecasts
The financial services company reported better-than-expected second quarter earnings and sales on Aug. 14. According to FactSet, Q2 earnings grew 22.9% over last year's quarter on 4.9% revenue growth.
Client assets rose 21% over the prior year's quarter, while the number of active clients grew 11%. On a negative note, gross margin decreased to 67.7% from 72.0% and net inflows decreased by 49%.
Analysts expect full-year EPS to rise 24% this year as well as next year, according to FactSet.
Mutual funds increased exposure to the stock in June, with 397 owning shares, up from 341 in March.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
