On Friday, Evercore ISI increased its price target on shares of Virtu Financial (NASDAQ: NASDAQ:VIRT), a leading financial services firm, to $32.00 from $29.00. The firm maintained its In-Line rating on the stock. This adjustment comes in the wake of Virtu Financial's third-quarter performance, which aligned with expectations and reflected consistency with the previous quarter's results.
Virtu Financial reported a third-quarter normalized adjusted earnings per share (EPS) of $0.82, which was in line with Evercore ISI's estimate and slightly above the consensus estimate of $0.78. The company experienced a marginal 1% quarter-over-quarter increase in adjusted net trading income (ANTI), amidst mixed market conditions.
Market volumes and volatility saw a slight uptick, but the overall market opportunity and quoted spreads were not as favorable as these figures might suggest.
Management's efforts to control costs were successful, with expenses rising only 3% quarter-over-quarter, and the company's stock buyback program remained within the expected guidance range. However, Virtu's organic growth initiatives saw a sequential decrease, with ANTI dropping by 5% quarter-over-quarter, attributed to lower average volumes in cryptocurrencies and narrower index option spreads.
In response to these results and market conditions, Evercore ISI has made a slight upward revision to its future earnings forecasts for Virtu Financial. The firm's forecast for fiscal year 2025 normalized adjusted net income per share has been increased to $2.98 from the previous estimate of $2.90, which is still below the consensus estimate of $3.10.
Additionally, Evercore ISI has set its fiscal year 2026 EPS estimate at $3.29, compared to the consensus estimate of $3.26.
The new $32 price target is based on approximately 11 times Evercore ISI's adjusted normalized net income per share estimate of $2.94, which excludes equity-based compensation. Despite the target increase, Evercore ISI's stance on Virtu Financial remains In Line, indicating that the firm's performance is expected to run parallel to the sector's average.
In other recent news, Virtu Financial reported steady Q3 results, demonstrating resilience amid mixed market conditions. The company announced an adjusted earnings per share (EPS) of $0.82 and an adjusted net trading income of $388 million, underpinned by robust market-making activities, particularly in Asia and U.S equities. The firm's EBITDA reached $215 million, resulting in a 55% margin. Noteworthy strategic initiatives include the launch of Virtu Technology Solutions and an emphasis on crypto options and ETF block trading.
Virtu Financial also repurchased 1.7 million shares and reaffirmed a quarterly dividend of $0.24. The company expressed a commitment to strategic growth and efficient capital management, with a particular focus on options trading in the Asia-Pacific region. In terms of future developments, Virtu Financial anticipates stable operating expenses and is optimistic about growth in options trading. However, potential regulatory changes, such as SEC proposals, could impact market rebates and liquidity.
CEO Douglas Cifu and CFO Joseph Molluso highlighted the company's investment in options markets and the minimal impact of the OCC's intraday margin rule on Virtu. They also elaborated on the company's stock buyback strategy and compensation management, indicating a focus on dollar-cost averaging and maintaining appropriate compensation ratios.
InvestingPro Insights
Virtu Financial's recent performance and Evercore ISI's price target increase are further supported by data from InvestingPro. The company's market cap stands at $4.81 billion, with a P/E ratio of 16.31, suggesting a reasonable valuation relative to earnings. Notably, Virtu Financial has demonstrated strong financial performance, with revenue growth of 10.43% over the last twelve months and a robust gross profit margin of 51.89%.
InvestingPro Tips highlight Virtu's financial strength and market position. The company has maintained dividend payments for 10 consecutive years, indicating financial stability and commitment to shareholder returns. Additionally, Virtu is trading at a low P/E ratio relative to its near-term earnings growth, which aligns with Evercore ISI's positive outlook on the stock.
The company's strong return over the last year is evident in its impressive 77.35% price total return over the past 12 months. This performance, coupled with analysts' expectations of profitability and earnings growth this year, supports the optimistic view on Virtu Financial's prospects.
For investors seeking more comprehensive analysis, InvestingPro offers 10 additional tips for Virtu Financial, providing deeper insights into the company's financial health and market position.
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