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Is It Too Late to Buy Futu Holdings Stock After Recent Surge?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
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Futu Holdings Limited has seen its stocks surge by 13.51 percent on Monday. This significant uptick comes in the wake of news highlighting strong quarterly earnings reports, which have boosted investor confidence. Additionally, recent developments in partnerships and market expansions have contributed to the positive market sentiment around the company, driving the stock price higher.

Headlines Affecting Futu Holdings Limited:

  • BofA raised Futu Holdings’ price target to $90 from $80.20, reflecting positive Q3 guidance and a ready market in Hong Kong and China.
  • Futu Holdings’ stock climbed around 8% after Tencent Holdings sold part of its shares at a premium, marking a significant vote of confidence.
  • Prominent brokerage Futu Holdings saw a 3.1% stock increase among Asian ADRs in the US market, indicating strong performance and investor interest.

Candlestick Chart

Live Update at 13:32:31 EST: On Monday, September 30, 2024 Futu Holdings Limited stock [NASDAQ: FUTU] is trending up by 13.51%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Quick Overview of Futu Holdings Limited’s Recent Earnings and Key Financial Metrics

Recent months have been nothing short of a whirlwind for Futu Holdings Limited. From a current stock price skirting just below $100 to the highs achieved in intra-day trading recently, the company has shown remarkable resilience and growth. With the recent price target upgrade by BofA to $90 from $80.20, confidence in Futu’s Q3 guidance and future earnings is soaring.

Focusing on the fundamentals:
* Revenue clocked in at $9.12 billion with a revenue per share of $97.67.
* A relatively low P/E ratio of 17.52 signifies that the stock is not massively overvalued.
* A price-to-book ratio of 3.74 also places it in a favorable category compared to many tech stocks.

Futu’s return on equity sits at 7.39%, showing sound management effectiveness. The company’s substantial leverage ratio of 4 does signal a cautious note, but given the sector’s capital-intensive nature, it’s not alarmingly high.

Interpreting these numbers coupled with recent financial reports, it’s evident that Futu has a sturdy balance sheet. With total assets amounting to $97.14 billion and a significant portion held in cash and cash equivalents at $49.31 billion, the firm stands poised to capitalize on new opportunities. The extensive investments in securities ($3.36 billion) also hint at a broader strategy to hedge and benefit from market movements.

News of Tencent Holdings selling a portion of its stake in Futu for $206 million at a premium price paints a vivid picture of confidence. Despite this partial exit, Tencent’s move is likely strategic, part of a larger trend following recent rate cuts by the People’s Bank of China. These actions may signal faith in the company’s long-term trajectory rather than a lack of it.

Intra-day trading data showcases a wild ride with notable peaks and troughs. For instance, on 30 Sep 2024, the stock peaked at $102.99 before settling at $97.26, illustrating active investor interest and potential volatility. Yet, the closing above the opening price ($93.01 on 30 Sep) underscores a strong market sentiment pushing the stock upwards.

Futu Holdings Limited Expected Trajectory

With BofA revising Futu’s price target upwards largely due to robust Q3 guidance, potential asset reallocation amidst Fed rate cuts, and favorable policies in China, optimism reigns. This forward guidance suggests higher client assets and increased trading velocity.

A pivotal moment came when Tencent, a stalwart in tech holdings, chose to offload a portion of its Futu shares at a 5.9% premium over the last close. The ensuing rally, with an 8% uptick in share value, further validated market confidence. Despite global economic headwinds, such as a volatile stock market environment, Futu’s performance hints at a resilient and adaptive strategy.

Reviewing detailed trade data, Futu’s shares have shown an upward momentum bolstered by positive developments. Price actions on 27 Sep 2024, with a close near $85.68 after an opening of $82.8, signpost sustained investor enthusiasm.

Delving into Futu’s latest key ratios:
* A high pre-tax profit margin of 48.3% augurs well for profitability.
* Valuation metrics like a P/E ratio of 17.52 and a book value per share (BVPS) of $178.3 highlight attractive investment avenues relative to current stock prices.

Examining the depth of these statistics, the optimistic outlook by BofA gains more credibility. Positive Q3 earnings, speculation of larger Fed rate adjustments, and anticipated Chinese market buoyancy all paint a prosperous picture.

Implications of Recent News on FUTU Stock

The recent 8% hike links directly to Tencent’s premium share sale, a broader trend among Chinese company investors post the rate cut by the People’s Bank of China. Such economic maneuvers generally boost investor confidence, reducing borrowing costs and encouraging investment—an environment where Futu seems well-placed to thrive.

Futu’s consistent 3.1% gains among Asian ADRs in the US further underscore strong performance and increasing investor trust. Futu’s brokerage and wealth management platform’s growing prominence among the Asian ADRs signifies a broader market acceptance and performance reliability.

Tencent Holdings’ Partial Sale of Futu Shares

Tencent Holdings’ stake sale at a premium resulted in a substantial rise in Futu’s share price. Tencent reaped $206 million from the transaction, which sent ripples through the market, showcasing strong demand and underscoring confidence in Futu’s future. Investors took this as a bullish signal, propelling Futu’s stock northward.

The sentiment among investors and analysts following this transaction is one of positivity. The premium price attained by Tencent highlights the market’s readiness to invest in Futu’s potential, signaling long-term optimism.

Bank of America’s Upwards Revision

Bank of America’s recent upward revision in price target to $90 accentuates the positive sentiment surrounding Futu. This uplift reflects not only the projected favorable Q3 results but also the broader macroeconomic landscape, influenced by Fed rate adjustments and supportive policy measures in China. Enhanced client assets and trading velocity are expected benefits, both of which bode well for future profitability and stock performance.

More Breaking News

Future Potential

The potential asset reallocation as a result of Fed rate cuts is another critical factor. With lower borrowing costs, companies like Futu can access cheaper capital, which can be funneled into expanding operations, technology upgrades, or other growth initiatives. This is a setup for potentially higher earnings, reflected in the earnings per share and overall profitability projections moving forward.

Investors keen on growth stocks should note that Futu, with its competitive advantages and robust financials, represents a lucrative opportunity. Despite the risks associated with its high leverage, the strategic outlook and anticipated market conditions seem favorable, positioning Futu as an appealing investment in the tech-financial hybrid space.

As the market digests these developments, the trajectory looks optimistic. Futu’s adept navigation through economic shifts, strategic asset allocations, and its alignment with broader market trends portray a promising future. While risks inherent to such dynamic environments cannot be entirely dismissed, the potential rewards tilt the balance favorably for discerning investors.

In summary, Futu Holdings Limited’s recent positive developments—backed by a strategic partial exit by Tencent at a premium, robust financials as highlighted by BofA’s price target uplift, and consistent performance across markets—paint an optimistic future. This confluence of favorable news and financial strength places Futu in an enviable position, suggesting continued upward momentum and an attractive proposition for investors eyeing the fintech sector.

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”