On Thursday, Goldman Sachs (NYSE:GS) revised its stance on flatexDEGIRO AG (FTKn:GR) (OTC: FNNTF), elevating the stock from a Neutral to a Buy rating. The firm also increased the price target to EUR17.00, up from the previous EUR13.20. The upgrade reflects a positive outlook on the stock's potential, despite its year-to-date (YTD) increase of 16%.
The rationale behind the upgrade is two-fold. Firstly, regulatory uncertainties that previously clouded the firm's outlook have significantly diminished. This change follows an announcement that the German Federal Financial Supervisory Authority's (BaFin) special commissioner has completed a positive review of flatexDEGIRO, confirming that the serious deficiencies identified in the 2022 special audit have been addressed, resulting in the termination of the commissioner's mandate.
Secondly, Goldman Sachs anticipates a turning point in European retail trading. Analysts at the firm expect trading volumes to rise from 2025 onwards, driven by an improvement in consumer sentiment as inflationary pressures ease and interest rates are reduced. This optimistic view is supported by projections that are 4-5% higher than the Visible Alpha Consensus Data for total transactions and commission income for the years 2025-26.
The expected increase in trading volumes is projected to translate into a substantial compound annual growth rate (CAGR) for adjusted EBITDA. Goldman Sachs forecasts a 20% CAGR from 2023-26 for flatexDEGIRO, indicating strong growth potential for the company in the coming years. This growth forecast is based on the belief that the European retail trading market is at an inflection point, with the potential for significant expansion as market conditions improve.
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