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JP Morgan Maintains an Overweight Rating on Futu, With a Target Price of $88.00

Futu News ·  Aug 22 19:32  · Ratings

On August 21, JPMorgan released a research report maintaining an "overweight" rating on Futu Holdings and slightly lowering the target price from $90 to $88. JPMorgan pointed out the following highlights:

2Q results were a beat: Revenues grew by 26% y/y (or 21% q/q) on the back of the sequential improvement in turnover, increase in margin financing balance. Management revised up the full-year client guidance from 400k to 550k as client growth remained solid in 2Q (155k), and net asset inflow also edged up from ~HK$35bn in 1Q to over HK$40bn in 2Q.

Development of new business initiatives on track: Management disclosed that client AUM continued to improve and trading velocity remained high in the Japan and Malaysia markets as Futu continued to roll-out new products and services in the two markets. Futu launched crypto trading services in Hong  Kong SAR and Singapore in August, and is in the process to contribute its R&D capability to Airstar Bank after it acquired a 44% share of Airstar Bank in June.

Estimate and PT changes: JPM has revised estimates to reflect stronger paying client growth, and the increase in trading turnover. As a result, 2024- 26E revenues estimates are revised up by 1%/1%/1%, while 2024-26E earnings estimates have been trimmed by 3%/3%/2% due to the increase in S&M expense amid stronger client growth. They arrive at a new Dec-24 PT of US$88, and maintain their OW rating on Futu.

Downside risks include:

weakness in China tech stocks, leading to lackluster trading volume growth;

regulatory risk;

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

Upside risks include:

higher-than-expected growth in paying client numbers;

stronger than-expected trading volume growth;

better-than-expected operating efficiency improvement;

Futu launched crypto business in Aug-24, which could bring upside to clients and AUM growth.

The above content is for informational or educational purposes only and does not constitute any investment advice related to Futu. Although we strive to ensure the truthfulness, accuracy, and originality of all such content, we cannot guarantee it.
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