On August 28, BofA upgraded FUTU from Underperform to Buy and raised the target price from $32.15 to $62.80.
BofA pointed out the following highlights on FUTU:
Sentiment and valuation likely at a trough level. Futu's 12-month forward P/E is 12.1x now, BofA believes the current valuation is likely at a trough level as:
China regulations have become more stable, and existing China client base could stay largely stable
Trading velocity is at a historical low level and could be boosted by supportive policies
Futu's profitability will likely remain strong for 2023-24E
Futu's share buyback provides downside protection
Encouraging progress in HK and overseas markets. Investors now see Futu mainly as a beta name, and pay little attention to the growth perspective. However, with sentiment and valuation likely at a trough level, BofA believes it's time to revisit Futu's alpha angle.
HK: continue to increase penetration and strengthen leading position
Singapore: paying clients' number and quality keep improving
Japan: a big market with large potential and few competitive incumbents
Other markets: positive optionality
Expect paying clients to grow at teens in 2023-25E
BofA raises 2023-25E EPS by 7-24%, raises target P/E from 8x to 14x (still below the mid-point of the trading range since China regulation tightening), roll over the valuation base to 2023-24E, raises price objective to USD62.8, and upgrade Futu to Buy. Positive catalysts include capital market recovery and better-than-expected overseas market development.
Risk:
Stricter-than-expected regulations.
Large US/HK market correction.
Intensified competition.