Tuesday, BofA Securities updated its outlook on Virtu Financial (NASDAQ:VIRT), increasing the price target to $22.00 from the previous $20.00 while maintaining a Buy rating on the stock. The adjustment comes as a response to the significant growth in quoted spreads, which serve as a potential maximum revenue per trade for the company.
Virtu Financial, a leading financial services firm, has seen a notable uptick in its quoted bid-ask spread, which had reached record lows in the fourth quarter of 2023. The firm is now benefiting from increased volatility and a reduction in subdollar trading, which began in December, positively impacting spreads by an anticipated sequential increase of 35%.
The firm's earnings per share (EPS) estimates for the first quarter of 2024 and the full years of 2024 and 2025 have been revised upwards to $0.61, $2.61, and $2.78, respectively.
This revision is attributed not only to the spread dynamics but also to improved trading volumes across various asset classes. Data for the quarter to date suggests a 6% quarter-over-quarter rise in volumes for January and February compared to the fourth quarter of 2023, with off-exchange volumes climbing an additional 2% month-over-month in March.
The analyst also highlighted the influence of recent meme stock initial public offerings (IPOs), which are expected to significantly boost retail trading volumes in March.
Additionally, Virtu Financial's efficient monetization of cryptocurrency ETF volumes, which are higher than most other symbols, has contributed to the firm's strong performance. Cryptocurrency ETFs, launched in January, have amassed $28 billion in net inflows, marking a successful quarter.
The new price target of $22 suggests a 12% total return potential for Virtu Financial's shares, indicating a positive outlook for the company's financial performance in the upcoming periods.
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