Inter drops 18% since debut on Nasdaq, but JP Morgan believes stocks and BDRs could jump up to 160% in coming months; see why

As with most immigrants who have recently arrived in a new country, the Inter (INTR) has faced difficulties after landing on the US stock exchange. The timing of the move, a turbulent period for the entire equity market, doesn’t help either.

Since its debut on Nasdaq, last Thursday (23), the shares of the holding company of the digital bank, Inter&Co, have dropped 18%. This Monday (27) the fall is 3.83% and the papers are quoted at US$ 3.26.

The INBR31 BDRs, stock receipts traded on the B3, reflect the positive performance of the Ibovespa and rose 0.47% to R$16.96. Follow our complete market coverage.

As with BDRs, JP Morgan believes that the bank has the capacity to overcome the difficulties imposed by the change and the macroeconomic scenario and has started to cover shares with a buy recommendation.

Time to buy Inter’s shares and BDRs?

Investment bank analysts met with João Vitor Menin, CEO of Inter, last week — and left the conversation with renewed optimism.

“The company is increasing its rates on several products, and we welcome the focus on monetization, which, in our view, should begin to gain traction in the coming quarters and is the main reason for our recommendation,” the analysts write.

For JP Morgan, discounted equity valuation creates an attractive entry point for new investors. “The short-term outlook is shaky due to the worsening credit cycle and higher provisions, but we welcome management’s new mindset.”

In addition to the buy recommendation, the investment bank has set a bold price target for INTR stocks: $8, with potential up 145% by December this year. For BDRs, the projected jump is even greater, around 160%, with a target price of BRL 44.

Provisions worry, but higher interest rates guarantee revenue

Despite the positive view for Inter, JP Morgan warns of the risks in the investment thesis: “provisions are the question mark, but management sees improvement in trends in 4Q22, and the re-pricing of loans means a better 2023”.

The bank estimates that an increase of 700 basis points in monthly fees – which would rise from 7% per month to 14% per month – could generate around R$200 million in gross financial income.

“In addition, Inter has a good (and cheap) deposit base and excess capital, a differential in relation to most fintechs”, reinforce the analysts.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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