On Tuesday, Citi updated its stance on UP Fintech Holding Ltd. (NASDAQ: TIGR), raising the price target to $5.80 from $5.50, while keeping a Sell rating on the stock. The adjustment follows UP Fintech's, also known as Tiger Broker, reported third-quarter non-GAAP net profit of $20.1 million, marking a significant increase of 286% quarter-over-quarter and 25.6% year-over-year, which is the highest since the first quarter of 2021.
The impressive profit surge was primarily attributed to a substantial rise in trading volume, which saw a 54% increase from the previous quarter and more than doubled year-over-year with a 103% hike. Additionally, the firm's rapid expansion of its Margin Financing and Securities Lending (MFSL) business, which grew by 30% quarter-over-quarter and 102% year-over-year, contributed to the earnings spike. The upbeat market sentiment due to the rally in China was noted as a key driver of this growth.
Operating profit, excluding share-based compensation, also saw a remarkable jump to $28.3 million in the third quarter of 2024, which is approximately 2.81 times higher quarter-over-quarter and 1.36 times higher year-over-year. This performance stands out particularly because it comes from a relatively low base.
In the third quarter, Tiger Broker added 50.5 thousand new paying customers, a 3.3% increase from the previous quarter and more than double the number year-over-year, with a 105% growth. By November 12, 2024, UP Fintech had already met its full-year target of 150,000 new paying customers, which represents 86% of the management's guidance for the first nine months of 2024.
The price target hike to $5.80 is based on a Discounted Cash Flow (DCF) valuation after revising earnings estimates. Despite the positive performance and the achievement of the full-year new customer guidance, Citi maintains a Sell/High Risk rating on UP Fintech Holding Ltd. The firm's cautious stance is primarily due to a considerable stock price increase of around 50% since the policy changes on September 24, 2024, and concerns that the company's earnings may have limited sensitivity to the rallies in China and Hong Kong markets.
In other recent news, UP Fintech Holding Limited has announced the pricing of its public offering of 15 million American Depositary Shares (ADS) at $6.25 per ADS. The company expects to raise approximately $90 million in net proceeds from this offering, which it plans to use to bolster its capital base and fund business development initiatives. The offering is expected to close subject to standard conditions, with Deutsche Bank AG (NYSE:DB), China International Capital Corporation Hong Kong Securities Limited, and US Tiger Securities, Inc. serving as joint bookrunners.
Simultaneously, UP Fintech reported a record-breaking second quarter of 2024, with total revenue hitting an all-time high of $87.4 million. However, the company's second-quarter non-GAAP net profit showed a significant decline due to a one-time provision of $13.2 million for a legacy stock pledge business in Hong Kong.
In light of these developments, Citi has downgraded UP Fintech's stock from Buy to Sell and adjusted the price target to $5.50. Despite the downgrade, Citi maintains a Buy rating on the stock, anticipating further strength in trading volumes and revenue momentum in the third quarter.
InvestingPro Insights
Recent data from InvestingPro offers additional context to UP Fintech Holding Ltd's (TIGR) performance and market position. The company's market capitalization stands at $1.12 billion, reflecting its current market valuation. TIGR's revenue growth of 12.96% over the last twelve months, coupled with a robust quarterly revenue growth of 32.76% in Q2 2024, aligns with the strong performance noted in the article.
InvestingPro Tips highlight that TIGR's net income is expected to grow this year, which corresponds with the significant profit increase reported in the article. The stock's strong return over the last three months, with a 79.32% price total return, reflects the market's positive reaction to the company's performance.
It's worth noting that TIGR is trading at a high earnings multiple, with a P/E ratio of 35.36. This valuation metric, combined with the stock's high price volatility mentioned in the InvestingPro Tips, may provide context for Citi's cautious stance despite the company's strong performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for TIGR, providing a deeper understanding of the company's financial health and market position.
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