Inter & Co Inc (NASDAQ:INTR) bull rally may not subside and here’s why

Inter, a pioneering Brazilian company with its multifaceted “super app”, has experienced a remarkable upward trajectory in its shares this year, sparking intrigue and optimism among investors. Notably, Citi’s recent evaluation suggests that this momentum is not poised to diminish in the near future.

Rafael Frade, an analyst at Citi, recently transitioned his stance on Inter from a neutral position to a buy recommendation. This decision was accompanied by a notable increase in the price target from a modest $2 per share to a more ambitious $5.30 per share. If Frade’s predictions hold, this would mean a potential rise of 33% from the closing price last Thursday.

A major contributing factor to this optimistic forecast is Inter’s commendable performance in the second quarter. According to Frade, the quarterly results have significantly amplified his confidence in Inter’s prospective capabilities. He stated, “We believe that 2Q23 results show good advances in this direction, with potential further improvements in [net interest margins] coming from new initiatives and lower rates.”

Frade’s analysis highlights Inter’s strategic efforts to augment its return on equity (ROE). By reassessing its credit portfolio and ensuring expense regulation, the company has been signaling a clear trajectory towards higher ROE. Though there were initial uncertainties about the duration required for this transition, the Q2 results have alleviated many of these concerns. Frade further commented on the promising advances in net interest margins due to new initiatives, coupled with prospective improvements in the cost of risk owing to tighter controls on credit card issuance.

Earlier in the week, Inter reported exceeding analyst predictions with its net income and revenue figures for Q2. A noteworthy mention is the company’s significant expansion in its client base. A surge of 34% from the previous year resulted in a staggering 27.8 million clients now associated with Inter.

Reflecting on the year so far, Inter’s shares have already showcased an 80% rally. Impressively, just this week, the shares have seen a 16% uptick.

In summation, Inter’s “super app” platform, which seamlessly integrates services ranging from e-commerce and investment avenues to even airplane ticket purchases, coupled with its strong Q2 performance, solidifies its standing in the market. As industry watchers and investors closely monitor its journey, Inter continues to underscore the potential of innovative business models in the digital era.