On May 27, JPMorgan Chase upgraded FUTU from a “neutral” rating to a “overweight” rating and raised their price target from $62 to $92 in a research report.

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

• 1Q24 Preview: a) JPM expects brokerage commission income to increase 34% q/q (or 12% y/y) in 1Q24 on the back of the improving derivatives trading in the mix; b) JPM forecasts interest income to increase 20% q/q or 5% y/y in 1Q24; c) JPM forecasts ~124k new paying clients growth in 1Q24, representing ~35% of the 350k new paying clients guidance in 2024. S&M expense will increase by 73% q/q or 123% y/y in 1Q24; d) JPM forecasts net profits to contract 7% y/y in 1Q24.

• Estimate and Price Target changes: JPM raises 2024-26E earnings by 7%/15%/16% to factor in better-than-expected client growth, strong client asset inflow, and upside to commission income due to higher trading turnover and increase in derivatives. JPM also raises PE multiple, leading to a 48% increase in end-24 PT to US$92, implying 24e PE of 18x.

Downside risks include:

1. regulatory risk;

2. lower-than-expected growth in the number of paying clients;

Upside risks include:

1. higher-than-expected growth in paying client numbers;

2. stronger-than-expected trading volume growth;

3. better-than-expected operating efficiency improvement;