BB Investimentos (BB-BI) reduced the target price for the company’s shares B3 (B3SA3), the company responsible for managing the Brazilian Stock Exchange, from R$15.60 to R$14.60 (with shares trading today at R$11). The review was released by the bank to the market this Tuesday (23).
BB-BI says that this decision to lower the target price of B3 shares was motivated by a set of factors that have impacted the company’s performance in recent months. “Influenced by a scenario different from the expectations of most of the market, B3 presented low average volumes traded in its main segment in the first months of the year”, states the report.
This scenario contrasts with the expected resumption of risk appetite on the part of investors, driven by more robust economic data in the United States, such as positive indicators in the job market.
The strategists’ analysis also takes into account the global implications of a possible maintenance of American interest at high levels for a prolonged period. This has generated repercussions in the international financial market, affecting the flow of foreign capital to Brazil and contributing to a challenging environment for companies like B3according to the report.
However, despite this downward revision, the recommendation of purchase of sharess from B3 was maintained by the investment bank.
Understand the factors that led BB-BI to reduce B3’s target price
The performance of B3 shares has been impacted by several factors throughout this year. In addition to the drop in traded volumes, the prospect of a new competitor entering the local market in 2025 has generated uncertainty among investors.
Revisions in expectations regarding the United States’ monetary policy have contributed to a negative net balance of more than R$30 billion in foreign capital in the country this year, according to BB-BI.
The review of the B3 valuation by BBI took into account the results of the fourth quarter of 2023 (4Q23), the operational data released by the company, the prospects for its main business lines and updates to macroeconomic assumptions.
Actions recommended by BofA after change in pricing policy
Bank of America (BofA) reaffirms its buy recommendation for BofA shares B3 (B3SA3), considering the recent changes to the Brazilian Stock Exchange’s pricing policy as an “important” movement in a scenario of possible competition and lower volumes.
With the focus on reducing rates, the bank says it maintains its optimistic outlook for B3SA3 sharesexpecting a recovery in trading volumes throughout the second half of this year.
According to analysts Mario Pierry and Antonio Ruette, the current multiple price/profit per action of B3which is around 13.3 times, substantially below the levels observed in recent easing cycles, which varied between 20 and 25 times, in addition to being around 40% lower than its international peers.
The new B3 pricing policy includes charging trading and post-trading fees based on the previous month’s average daily traded volume (ADTV), regardless of investor type. Additionally, in the custody segment, the company adjusted custody balance fees, eliminated the Depositary Receipts (DR) maintenance fee, and introduced a custody balance fee for non-resident investors, exempting them from the Depositary Receipts (DR) maintenance fee. custody accounts.
Common target price of R$17 for B3 ON shares, BofA estimates a potential appreciation of 52% in relation to the closing of the last trading session, which took place last Friday (19). B3 shares are traded today at R$11.27.
See how the arrival of a competitor should affect B3
Experts linked to the financial market are aware of the possible competition that is emerging for the Stock Exchange operator in Brazil, B3. The announced arrival of a new scholarship is scheduled for the second half of 2025.
For Femisapien, economist and partner at Quantzed, a technology and financial education company for investors, the entry of a new market could open up opportunities for investments in assets not yet available on B3, increasing the interest of foreign investors in the country.
“Competition would theoretically lead B3 to provide better services and charge better prices, in addition to the aforementioned opportunity for startups, which are mostly technology companies, to list shares on the market. Competition for B3 is always good, as it motivates the company to provide better services”, he says.
Rodrigo Cohen, investment analyst and co-founder of Escola de Investimentos, shares the view that the B3 monopoly has been an obstacle to the growth of the Brazilian financial market. “The entry of a new exchange has been expected for many years. I believe that B3’s monopoly has always, in my opinion, hindered the growth of our market, because, when we have a monopoly, there is no competition”, he assesses.
He also highlights that the introduction of a second stock exchange can increase the visibility and credibility of the Brazilian market. “With the country growing, we may have new IPOs, depending on how it goes. There could be an IPO craze, if the government helps. I think this is very positive news and that, depending on the services that the new exchange offers, it will be great”, comments Cohen.
The news of the possible competition from B3 emerged with the initiative of Mubadala Capital, an asset from the United Arab Emirates, which is organizing the opening of new stock exchange. The project, which still depends on approval from regulatory authorities, is proposed to be based in Rio de Janeiro and operate in all markets, including shares, derivatives and foreign exchange. Analysis of the request by ATG, the company involved in the project, is already being carried out by the Central Bank and the Securities and Exchange Commission (CVM).
The news, released on the 1st of this month, impacted B3 shares, which registered a drop of 3.2% in the trading session after the announcement – in the month the drop is 7.5%. The market is now awaiting the development of this possible competition and its implications for the Brazilian financial scenario.
B3’s profit falls 8.8% in 4Q23
In the fourth quarter of last year (4Q23), the B3 recorded an 8.8% drop in profit, which totaled R$915.5 million. Factors such as reduced revenue and increased expenses, especially related to data processing, contributed to this result, according to the company’s balance sheet.
The recipe for exchange operator fell 2.8%, reaching R$2.24 billion, reflecting weaker movement in the stock market, which negatively impacted the listed segment.
This segment, which corresponds to almost 57% of the company’s total revenue, B3, encompasses not only shares, but also variable income instruments, interest, currencies and commodities. The 13.5% drop in revenue from this segment could not be offset by the increase in revenue from other operating segments, such as counter and technology, data and services.
