HSBC believes emerging markets will be “less vulnerable” if President-elect Donald Trump raises tariffs in 2025.
The EM markets have a better growth dynamic than developed markets, which is why they are entitled to a small “overweight” on their stock.
The firm believes that XP (the company) and Cemex (the stock), could both rise by over 50% in the next 12 months.
Take a look at the reasons why HSBC has a positive outlook on these stocks.
XP Inc (NASDAQ: XP)
XP was cut in half by 2024, but HSBC expects the next year to tell a completely different tale. The analysts’ $25 price target implies a huge 90% increase from the current level.
HSBC believes that XP is “quite correlated” to Brazil’s policy rate cycle, as the company has a wide range of products, such as equities and real estate investment trusts. It also offers fixed income and pension plans.
Investment firm believes Brazilian company will benefit from the central bank’s decision to stop raising interest rates by 2025.
HSBC also likes XP because it “continues showing resilient earnings performance” and its per-share earnings are growing at an estimated annual compound rate of around 12% from 2022 to 2024.
The Brazilian firm reported that its revenues increased by 4.0% in the third quarter of its fiscal year.
According to HSBC analyst, XP’s dividend yield is 4.86%. This makes it a more attractive stock to hold for the long-term.
Cemex SAB de CV (NYSE: CX)
HSBC expects the demand for Cemex to be affected by the newly elected US government.
The investment company still advises that investors buy shares in the Mexican company Cemex, as the markets are a little too negative about the firm.
The US operations of the building materials firm could actually benefit from Donald Trump’s tariffs against other countries. According to HSBC, this segment is expected to account for 35% of Cemex’s EBITDA by 2025.
Cemex’s stock currently trades at 4.6 times the estimated enterprise value for EBITDA in 2025, which is a discount of 35% compared with its historical 10-year average.
Holcim – its main global competitor is trading at 8,6 times EV/EBITDA as of writing.
The investment firm said today that “we see a significant rerating opportunity as Mexican macro-concerns ease” due to its pricing power and exposure of US infrastructure expenditures.
HSBC suggests buying Cemex and believes that they will rise to $9, which would indicate a potential of more than 60% from the current level.
Cemex, like XP Inc. is a dividend paying stock with a yield 1.12%.
The post Two emerging market stocks that could yield 50% in each case by 2025 will be updated as new information becomes available.
This site is for entertainment only. Click here to read more
