On January 17, J.P.Morgan released a research report and upgraded Futu from Neutral to Overweight with a $64.00 price target.

J.P.Morgan pointed out the following highlights on FUTU:

• Concerns on interest income overdone. Because: 1)Interest income to remain robust in the near term; 2)Negative impacts on interest income should be manageable; 3)Decline in deposit rate to be offset by volume growth.

• Overseas expansion provides upside on clients and AUM growth. Overseas contributed ~30% of paying clients as of 3Q23, up from ~10% at end 2021.

• Futu’s self-help programs on overseas expansion, product diversification (i.e., derivatives) and the cyclical recovery of overseas markets (i.e., US & JP) will likely lead to upside on trading volume growth.

J.P.Morgan upgraded Futu from Neutral to Overweight and set a price target of $64 based on a 15% 2024-26E EPS CAGR and 0.8x PEG.

Downside risks:

1. Weakness in China tech stocks, leading to lackluster trading volume growth;

2. Regulatory risk;

3. Lower-than-expected growth in the number of paying clients.

Upside risks:

1. Higher-than-expected growth in the paying client number;

2. Stronger-than-expected trading volume growth;

3. A better-than-expected operating efficiency improvement.