On August 24th, Jefferies released a research report stating that it maintains a "buy" rating on Futu and raised the target price from $59 to $64.8, which represents a 33% upside from the closing price on August 23rd.

Jefferies maintained its Buy rating on FUTU based on the following:

• 2Q23 total revenue grew 42.3% YoY to HK$2,484.9m, 13.5% and 8.6% ahead of consensus and Jefferies' estimate;

• In 2Q23, Futu added nearly 58K new paying clients (41K in 1Q23), with total paying clients reaching about 1.59 million. Quarterly paying client retention rate remained above 98% despite weak market sentiments;

• Total client assets increased 7.5% YoY and remained stable QoQ at HK$466.2bn despite the negative mark-to-market impact on clients’ Hong Kong stock holdings, thanks to accelerated net asset inflow across all overseas markets;

• In SG, its user base surpassed 800K, representing nearly 30% of local adults. Total client assets in SG achieved double-digit QoQ growth for the fourth consecutive quarter.

• In 2Q23, Futu continued to roll out new products and features across markets: (a) it introduced bracket orders for US and HK options/futures; (b) in HK and SG, it offers full access to algorithmic orders (TWAP and VWAP) to local retail investors; (c) exclusive 24/5 US stock trading unleashed in SG and AU.

Jefferies pointed out more highlights on FUTU as the following:

• China’s high net-worth individuals’ strong demand for geographically diverse investment portfolios will support Futu’s brokerage and margin financing businesses, as well as its emerging wealth management business;

• Futu’s proprietary technology infrastructure as its key strength over peers, which should help save costs and improve operating efficiency;

• Futu is ahead of other potential competitors by around 2-3 years in terms of financial licenses obtained, technology, and community etc.

Risks:

• Macro-headwinds impacting securities market trading volume in the US, HK and SG;

• Loss of market share due to competition;

• Lower-than-expected commission fee rate and interest rate;

• Unexpected restrictions on cross-border trading.