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Is It Too Late to Buy FUTU Holdings Stock?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
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Futu Holdings Limited is trading up by 5.14 percent on Tuesday, likely driven by recent favorable market conditions and positive investor sentiment. Significant news includes a strategic expansion into international markets and a new fintech collaboration, both expected to enhance future growth prospects. This optimistic outlook has investors bullish on Futu’s potential, propelling the stock higher.

Key Developments:

  • Futu Holdings reported Q2 revenue of $400.7M, beating expectations, with an impressive growth in global users and paying clients.
  • Bank of America analyst upgraded the price target for FUTU Holdings, citing robust Q2 results and positive guidance.
  • Citi analyst revised the price target downward but maintained a Buy rating, highlighting strong earnings and positive client asset inflows.
  • S&P Global Ratings reaffirmed FUTU Holdings’ long-term issuer credit rating at BBB-, with a stable outlook, reflecting its strong market position.

Candlestick Chart

Live Update at 16:25:16 EST: On Tuesday, September 17, 2024 Futu Holdings Limited stock [NASDAQ: FUTU] is trending up by 5.14%! 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 Report:

Futu Holdings delivered a stellar Q2 performance, far surpassing market expectations. Revenue shot up to $400.7M, comfortably beyond the consensus estimate of $363.96M. This significant leap underscores FUTU’s robust growth trajectory in an otherwise turbulent market. Imagine a runner breaking through the finish line with a burst of speed when everyone expected them to slow down—that’s FUTU for you.

The company experienced impressive growth in its user base, with global users reaching 23.3M, a 13.3% year-over-year increase. More importantly, it saw a remarkable 28.8% increase in paying clients, now totaling two million. The client retention rate remained impressively above 98%, with total client assets growing by 11.9% quarter-over-quarter to $74.2B. Trading volume surged by 21.1% QoQ, with record highs in US stock global trading volume and daily active revenue trades. This surge demonstrates FUTU’s ability to adapt and thrive in varying market conditions.

On top of this, FUTU expanded its product offerings by launching cryptocurrency ETFs and entering the crypto trading markets in Singapore and Hong Kong. This move signifies a strategic push to diversify revenue streams and capture emerging market segments, much like a seasoned chess player making strategic moves to control the board.

In terms of key ratios, FUTU’s pretax profit margin stands at 48.3%, showcasing its efficiency in turning revenue into profit. The price-to-earnings ratio (P/E) of 14.44 indicates that the stock might still be undervalued relative to its earnings, presenting a potential opportunity for investors. With a price-to-sales ratio of 6.78 and a price-to-book ratio of 2.52, the company is attractively priced compared to its peers. These ratios, much like a well-cooked meal, indicate that FUTU has the right blend of value and performance.

Financial strength also shines through with a leverage ratio of 4, which, although high, is managed prudently given its strong earnings. The company’s total assets amount to $97.13B, with significant holdings in cash and equivalents at $49.31B, showing a robust balance sheet capable of weathering economic uncertainties. Think of it as a fortress with strong walls, ready to face any invaders.

More Breaking News

Banking on Positive News: Price Target Raised

Bank of America analyst Emma Xu responded to FUTU’s strong Q2 performance by raising the price target to $80.20 from $77.60, maintaining a Buy rating. This positive outlook is rooted in FUTU’s impressive earnings and optimistic guidance for the future. It’s like receiving a gold star for an impeccable report card.

Emma’s projection of a 3% increase in earnings for 2024-26 highlights FUTU’s potential for sustained growth. This upgrade is a signal to investors that FUTU is well-positioned to capitalize on its ongoing successes. Investors, imagining a bustling lemonade stand on a hot summer day, might be tempted to join the queue.

Market Reaction to Revenue Beat

Futu Holdings also saw analysts like Citi reviewing their positions. While Citi’s Judy Zhang lowered the price target to $79 from $100, she retained a Buy rating. Her analysis underscores the significance of client asset inflows as a critical earnings driver, more influential than Federal Reserve rate cuts or looming recession risks. It’s akin to a farmer banking on a bountiful harvest despite uncertain weather forecasts.

Judy’s optimism is backed by solid Q2 earnings, which suggest that concerns over rate cuts and recession risks are already priced in. This perspective reinforces the notion that FUTU’s foundation is strong enough to withstand external pressures.

S&P Global’s Stable Outlook

Adding to the positive sentiment, S&P Global Ratings maintained a stable outlook on FUTU’s long-term rating and reaffirmed its long-term issuer credit rating at BBB-. This rating reflects FUTU’s sturdy market position in Hong Kong and its robust growth momentum, especially in overseas business. Imagine a seasoned sailor navigating through choppy waters with finesse; that’s FUTU steering through the market.

The S&P’s affirmation further instills confidence that FUTU is on a steady growth path, making it an attractive consideration for investors.

Performance Metrics and Market Implications

Looking at the recent price data, FUTU experienced a notable run-up from $58.79 on Sep 03, 2023, closing at $60.37 by the end of trading on Sep 17, 2024. This upward trend is reflective of the positive earnings reports and analyst upgrades. The journey of FUTU’s stock, with its peaks and troughs, mirrors an intrepid mountain climber scaling new heights after each ascent.

Futu’s Q2 earnings per share (EPS) moved up to 8.66 Hong Kong dollars from 7.99 a year earlier, outpacing predictions of 7.69. Revenue increased to HK$3.13 billion from HK$2.48 billion, again beating forecasts of HK$2.87 billion. This strong performance provided a slight boost in stock price, indicating investor confidence.

On the financial side, FUTU’s revenue of $400.7M reflects a 25.9% increase YoY while net assets climbed to $74.2B, an 11.9% quarter-over-quarter gain. Trading volumes also skyrocketed by 21.1% QoQ, reaching over $207.7B. Imagine a bustling marketplace where the buzz and activity signal prosperity—that’s FUTU with its climbing trade volumes and expanding assets.

S&P’s BBB- rating and stable outlook instantiate FUTU’s solid standing. The company’s effective management and strategic expansions create a favorable environment, fostering investor trust.

Reflections and Market Impact

The encouraging Q2 results, analyst upgrades, and S&P’s stable rating all contribute to a positive outlook for FUTU. Investors eyeing FUTU must consider its proven track record of growth, strategic market expansions, and robust financial health.

Future prospects look promising, underscored by diversified revenue streams such as cryptocurrency ETFs and new market entries. These strategic moves go beyond mere survival—they represent FUTU’s ambition to lead and innovate in the financial services sector.

Conclusion

As FUTU Holdings scales new heights with every quarter, questions arise about the perfect time to jump on board. The robust performance, upbeat analyst reviews, and solid ratings suggest that FUTU is a strong player in the market. However, like any savvy investor would tell you, diligence is key.

Is it too late to buy FUTU Holdings stock? The data implies that the journey is far from over, and there might still be plenty of upside to explore. The combination of solid earnings, strategic expansions, and positive outlook makes FUTU a compelling consideration, but always remember to make investment choices aligned with your financial goals and risk tolerance.

In the vibrant world of finance, FUTU is making waves, and the savvy investor knows that where there’s movement, there’s opportunity.

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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”