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

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
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Recent significant developments have likely propelled Futu Holdings Limited’s market performance. Notably, the introduction of their new mobile app, which streamlines financial services for millennials, and a promising report on expanding operations into Southeast Asia have generated positive sentiment among investors. As a result, on Tuesday, Futu Holdings Limited’s stocks have been trading up by 5.26 percent.

Can the Tech-Finance Maverick Continue Its Rally?

  • Bank of America boosts Futu Holdings’ price target from $80.20 to $90, citing positive Q3 guidance, beneficial Fed rate cuts, and improving markets in Hong Kong and China.
  • Tencent Holdings’ sale of Futu stock at a 5.9% premium boosts Futu’s shares by 8%, reflecting broader positive sentiment on Chinese economic support measures.
  • Futu Holdings’ stocks increased by 3.1%, ranking among top performers of Asian ADRs in the US.

Candlestick Chart

Live Update at 09:06:44 EST: On Tuesday, October 01, 2024 Futu Holdings Limited stock [NASDAQ: FUTU] is trending up by 5.26%! 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 Performance

Futu Holdings Limited surged on May 1, 2024, as its closing price hit $100.68. This aligns well with the upbeat sentiment surrounding the company’s future, especially after Bank of America’s recent ratings upgrade.

Let’s break it down. Bank of America raised the price target to $90 from $80.20, pointing to solid Q3 guidance and the potential reallocation of assets after federal interest rate cuts. Such a shift in forecast often follows a company showing significant momentum, and it validates investors’ faith in Futu’s future growth.

Then, Tencent Holdings made headlines by selling a portion of its Futu shares at a 5.9% premium. The sale raised around $206M and drove Futu’s stock 8% higher. Sounds like a masterstroke, right? This move mirrors a broader market trend where key players in Chinese companies liquidate stakes, anticipating Beijing’s economic support measures following a rate cut by the People’s Bank of China.

Additionally, Futu saw its shares rise by 3.1% among US-listed Asian ADRs, signaling a continuing positive trend. It’s like a domino effect of good news fuelling more good news, a pattern that Futu fans are getting used to.

More Breaking News

Digging Deeper into Futu Holdings’ Financials

Unpacking Futu’s financial reports tells a vibrant story of growth and dynamism. Starting with the income statements, the company recorded a revenue of around 9.12B for 2023. That’s substantial, especially considering its revenue per share of about 97.67. These numbers reflect the company’s robust business model and successful strategies.

Talking ratios, particularly the PE ratio standing at 17.52, one can see that investors are willing to pay this multiple times the earnings per share. That’s faith in its future earnings! Its price-to-sales ratio stands at 11.24, suggesting that the market is valuing each dollar of Futu’s sales quite generously, hinting at an optimistic outlook.

On profitability, the pretax profit margin is close to 48.3%. That’s impressive. It shows that almost half of every dollar earned translates into profit before taxes, a sign of efficient operations with robust profit generation potential.

The financial strength also looks solid, with a leverage ratio at 4. This means Futu is using its assets effectively to generate returns.

Breaking Down the Recent Developments

Bank of America’s Price Target Upgrade:

Bank of America raised Futu’s price target by a noticeable margin, reflecting confidence in the company’s future. The positive Q3 guidance and the anticipated favorable effects of Fed rate cuts can be seen as the main reasons. With predictions for higher client assets and increased trading velocity, BofA’s assessment points toward strong growth potential. Investors took note, and the stock price responded accordingly, adding fuel to the bullish sentiment around Futu.

Tencent Holdings’ Strategic Stock Sale:

Imagine standing on a crowded subway platform when someone starts handing out cupcakes. That’s what Tencent did by selling a chunk of its Futu stock at a premium. This move netted Tencent a hefty $206M and saw Futu’s stock surge around 8%. The icing on the cake was the premium price of 5.9% over the last closing price. This sale indicates strong market confidence, anticipating future gains for Futu as economic support measures in China come into play. It sent a ripple through the market, triggering optimism among investors.

Steady Ascent in US Markets:

Futu’s stocks gaining 3.1% in the US underlines a robust trend. This performance among US-listed Asian ADRs speaks to the growing recognition and valuation by international investors. It forms part of a pattern that reflects strengthening confidence in Asian markets, influenced by broader economic policies and targeted support measures.

What’s Ahead for Futu Holdings?

Based on above-ground information and market sentiment, Futu appears well-positioned for growth. Its strategic moves, strong financials, and positive external factors create a landscape ripe for further gains. Investors should watch for the impacts of Fed rate cuts, Chinese economic measures, and potential asset reallocations as critical drivers of performance.

What This Means for Investors

The recent movements suggest a bullish trend, driven by robust financials and strategic moves. However, due to market volatility and economic unpredictability, investors should remain cautious. Those already holding Futu shares are likely enjoying the ride, and new investors might find it appealing — but an eye on emerging market trends and a diversified portfolio is always wise.

Conclusion

Futu Holdings is riding a wave of optimism, backed by solid financials, strategic investments, and positive market dynamics. With an encouraging outlook from analysts and significant developments bolstering its share value, Futu’s stock could continue its climb. Whether you’re considering buying, holding, or simply watching, keeping an eye on this tech-finance titan’s journey will be fascinating.

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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”