On Monday (NASDAQ:MNDY), Deutsche Bank (ETR:DBKGn) maintained a positive stance on Futu Holdings Limited (NASDAQ: NASDAQ:FUTU), raising its price target to $118.40 from the previous $88.00 while keeping a Buy rating on the stock. The adjustment comes ahead of the company's third-quarter earnings report, scheduled for release on November 19, 2024.
The analyst from Deutsche Bank noted that in the third quarter of 2024, the U.S. equity turnover saw a slight decrease of 1% quarter over quarter. In contrast, Hong Kong's turnover experienced a modest increase of 3% during the same period. This discrepancy in market activity is part of the backdrop for Futu's upcoming earnings.
A significant uptick in trading activity was observed for Hong Kong stocks and Chinese ADRs towards the end of September, with the HSI Index climbing 11% in the last week of the month. These market movements are expected to reflect positively in Futu's third-quarter performance.
The forecast for Futu's third-quarter non-GAAP earnings is an 11% rise quarter over quarter, with revenues also expected to grow by 4%. The total trading volume for the quarter is anticipated to increase by 5%, alongside a stable blended commission rate of approximately 8.6 basis points.
The analyst's outlook suggests optimism for Futu's financial performance in the third quarter, highlighting the potential for growth despite mixed results in global market turnovers. The raised price target indicates confidence in the company's ability to capitalize on the increased trading activity observed in late September, particularly in the Hong Kong market.
In other recent news, Futu Holdings has been the focus of several positive analyst outlooks and strong earnings results. BofA Securities upgraded Futu Holdings shares with a 20% price target increase, reflecting revised earnings estimates and increased valuation multiples. JPMorgan also raised its stock price target for Futu Holdings, maintaining an Overweight rating due to improving retail sentiment in Hong Kong and mainland China.
The tech-driven online brokerage firm demonstrated significant growth in the second quarter of 2024, with a 29% year-over-year growth in paying clients and an 8% increase in net income. The company has also raised its full-year guidance for new paying clients to 550,000. These recent developments are amidst strong net client asset inflows and the launch of cryptocurrency trading in Hong Kong and Singapore.
BofA Securities and JPMorgan's positive outlooks on Futu Holdings are based on the company's diversified market exposure, robust client and asset growth, and improving market sentiments in Hong Kong and China. The analysts' decisions to raise the price targets are attributed to updated earnings forecasts and higher assumptions of trading velocity.
InvestingPro Insights
To complement Deutsche Bank's optimistic outlook on Futu Holdings Limited (NASDAQ: FUTU), recent data from InvestingPro provides additional context for investors. As of the last twelve months ending Q2 2024, Futu reported a robust revenue of $1.22 billion, with a notable revenue growth of 9.98%. The company's profitability is underscored by its impressive gross profit margin of 92.99% and an operating income margin of 52.84%, indicating strong operational efficiency.
InvestingPro Tips highlight that Futu has been highly profitable over the last twelve months, aligning with the analyst's positive earnings forecast. The stock has also demonstrated a strong return over the last three months, with InvestingPro data showing a remarkable 62.28% price total return over that period. This performance coincides with the increased trading activity in Hong Kong stocks and Chinese ADRs noted in the article.
However, investors should be aware that Futu is trading at a high P/E ratio of 23.77 relative to its near-term earnings growth, which may suggest the stock is currently priced at a premium. For those seeking a more comprehensive analysis, InvestingPro offers 11 additional tips that could provide valuable insights into Futu's market position and future prospects.
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