On Wednesday, Morgan Stanley (NYSE:MS) adjusted its outlook on Futu Holdings Limited (NASDAQ:FUTU) shares by raising its price target from $50.00 to $70.00. The firm maintained its Equalweight rating on the stock.
This revision follows a strong performance in the first quarter of 2024, where Futu Holdings exhibited robust client acquisition momentum.
The brokerage firm's impressive growth was highlighted by the addition of approximately 177,000 new paying clients in the first quarter, with around one-third of these clients originating from Malaysia.
This success is attributed to Futu leveraging its established brand and existing user base from its Singapore operations. Furthermore, Japan has contributed to over 10% of the new clientele, with an estimated total of about 30,000 clients within just two quarters of launching services there.
Despite a slight sequential slowdown in Malaysian client additions, Futu Holdings is optimistic about its growth trajectory, projecting over 100,000 new clients in the second quarter of 2024.
Consequently, the company has raised its full-year guidance to 400,000 new clients, up from the previous estimate of 350,000. The assets per client in both Japan and Malaysia are currently noted to be several thousand USD.
However, the management has expressed a conservative stance regarding profitability in the Japanese and Malaysian markets.
They indicated that achieving break-even in these regions is unlikely to occur more rapidly than it did in Singapore, where it took 2-3 years.
Despite this, there is an expectation that the conversion rate in Japan could improve to match the performance seen in other markets.
The updated guidance and the firm's strategic positioning in Asia-Pacific markets reflect Futu Holdings' continued expansion and potential for further growth.
InvestingPro Insights
Morgan Stanley's updated valuation of Futu Holdings Limited aligns with the company's recent financial performance and market activity. According to InvestingPro data, Futu boasts a market capitalization of $10.61 billion and a P/E ratio that has been adjusted to 19.35 based on the last twelve months as of Q1 2024. This valuation is underpinned by a solid revenue growth of 11.37% during the same period, showcasing the company's ability to increase its earnings. Furthermore, the robust gross profit margin of 93.09% reflects Futu's efficiency in maintaining profitability amidst its expansion efforts.
InvestingPro Tips reveal that Futu is trading at a low P/E ratio relative to near-term earnings growth, indicating a potentially undervalued stock that could interest value investors. Additionally, the company has demonstrated high returns over the last year, with a 100.31% increase, which may attract momentum investors looking for growth opportunities in their portfolio. For those interested in exploring further insights, InvestingPro offers additional tips on Futu Holdings, which can be accessed with an exclusive 10% discount on yearly or biyearly Pro and Pro+ subscriptions using the coupon code PRONEWS24.
While Futu does not pay dividends, suggesting a reinvestment strategy in its growth, the company's strategic moves in the Asia-Pacific markets and its performance metrics suggest a positive outlook for potential investors. With 9 additional InvestingPro Tips available, investors have ample data points to consider when evaluating Futu's investment potential.
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