How far will Nubank (NUBR33) and Inter (INBR32) go? – Money Times

Actions nubank (naked) that traded in New York already had a nearly 90% jump in 2023. Meanwhile, Inter (INTR) offering gains of about 40% a year.

Both stocks, which outperform most traditional banks, follow good market mood regarding stocks that have been hit hard during the monetary tightening cycle in Brazil and the United States.

What explains the grouping?

New banks engaged in a rally that broke out from its lows, driven by the belief that an easing of Brazil’s high interest rate cycle is approaching. The latest inflation data confirms the view that the Central Bank (BC) should announce the start of a negative downturn soon.

The national consumer price index (IPCA) for the month of May indicates a slowdown compared to the previous month. In May, the index increased by 0.23% compared to the increase of 0.61% recorded in April.

As a result, the index is accumulating to a 12-month high of 3.94%, from +4.18% in the previous month, below the expected average of +4.03%.

This latest data has led economists to revise downward expectations for year-end Brazilian inflation, with the stakes rising from 5.69% to 5.42%, according to this week’s Focus Bulletin.

In a report dated at the end of May, the Bank of America (BofA) He points out that the rise in stocks was not only supported by expectations of lower interest rates, but also by prospects for better results in the future, especially given the increased cost control.

Earnings estimates for the financial sector are up 7% year-to-date, according to the Bloomberg Consensus. Nubank received the most positive reviews (with expectations more than doubling), while Bradesco (BBDC4) that it Santander Brazil (San P11) was the most negative one,” he says.

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Larissa Quaresma, analyst at empirical researchNubank has been surprisingly good on recent balance sheets, says Nubank. Cost control has accelerated profitability gains, and despite the high lag, the company may continue to surprise with such control.

Meanwhile, Inter has improved its results because the Treasury has a related portion invested in a pre-fixed, which should benefit from an easing of pressure on the interest curve, if the macroeconomic scenario does not show negative surprises.

Is he here?

In BofA’s assessment, new revisions in consensus estimates may give more fuel to the stock rally, with the main driver coming from better revenue generation, which would be obtained in a more benign macro scenario, than lower interest rates.

Quaresma explains that the prospect of the end of the rate-raising cycle means that “premiums” on the interest-rate curve are “burned out,” which reduces the cost of capital for shareholders. This, he adds, leads to increased investor appetite for the stock.

For technology stocks, this movement is usually more intense, because the bulk of their market capitalization is in the form of cash flows far into the future. Therefore, interest is a variable that is relevant to this segment,” says the analyst.

In this way, amid the trend reversal in the stock market, as investors return to looking at domestic cyclical stocks and growth assets, Quaresma believes that the rise in Nubank and Inter shares may extend a little longer.

The market has already anticipated part of this move based on anticipation of a fall. If there is an actual decline, he says, the “certainty effect” could lead to an additional portion of technology stocks.

What do you do with stocks?

Empiricus has a neutral view of both Nubank and Inter. Even taking into account the improvement in Nubank’s fundamentals, the evaluation It looks unattractive to the analysis house, as the stock traded at 7.3 times its book value.

Inter, though evaluation Seen on the cheap (0.9 times book value), Empiricus is taking a more cautious view until it finds some continued improvement in operations.

at recent days , XP Investimentos Update estimates BDRs (Brazilian Depositary Receipts, share certificates issued in Brazil and backed by securities issued by companies incorporated abroad) from Nubank and Inter.

Among the new banks, the second name is preferred. While acknowledging that Inter is a bit behind Nubank on its monetization journey, the analysis team highlights the company’s operational progress. As an addition, the evaluation It looks attractive, as the stock is trading at 0.9 P/PV (price to book value).

Inter’s recommendation is to Buy, with a target of R$20.30.

Meanwhile, Nubank has a “neutral” rating and has a new price target of R$5.90. Despite the recent positive results, XP finds that evaluation The company is pricing “brilliant future” in the future.