Futu Holdings (NASDAQ:FUTU) shares surged more than 9% intra-day today after BofA Securities upgraded the company to Buy from Underperform and raised its price target to $62.82 from $32.15.
The bank turned more positive on the stock given more stable China regulations, sentiment and valuation at a trough level, as well as promising developments in HK and overseas markets.
As a result, BofA raised its EPS estimates for the years 2023-2025 by a range of 7% to 24%. The target P/E was adjusted from 8x to 14x, still positioned below the midpoint of the trading range due to the recent tightening of regulations in China.
The bank believes the current valuation is likely at a trough level as (1) the regulatory landscape in China has reached a level of stability, potentially maintaining the existing client base in the region, (2) trading velocity has hit historically low levels, and this could be lifted by supportive policies, and (3) the company's profitability is expected to remain robust in the years 2023-2024 as the interest income is more sustainable than expected. Furthermore, the bank noted that the share buyback provides downside protection.