On Tuesday, BofA Securities maintained its Buy rating on Interactive Brokers Group (NASDAQ:IBKR) and increased the price target to $147 from $139. The revision reflects an optimistic view of the brokerage firm's future, driven by a surge in retail trading activity and a favorable market environment.
BofA Securities' latest assessment comes on the heels of Interactive Brokers demonstrating robust client engagement, as evidenced by a 20% quarter-over-quarter increase in Daily Average Revenue Trades (DARTs) and strong utilization of margin loans. Additionally, the firm has experienced a swift acceleration in client account growth, boasting a 30% annualized rate.
The positive adjustment in the price target is also supported by raised earnings per share (EPS) estimates for the years 2024 through 2026. The new EPS projections are set at $1.67, $7.23, and $8.40, respectively, marking an increase from the previous estimates of $1.58, $6.86, and $7.97.
The outlook for Interactive Brokers is further bolstered by the expectation that the bullish market conditions will persist, which is anticipated to amplify the company's already competitive offerings and recent successes in securing new i-broker clients. Two significant i-broker clients are reportedly still in the process of onboarding.
Moreover, BofA Securities anticipates that Interactive Brokers could announce an acquisition in the near to medium term, given the company's substantial financial resources and management's previous comments on potential targets. Such a move is expected to contribute to the company's growth trajectory.
The revised price objective of $147 implies a potential total return of over 31%. This valuation is based on applying a 17.5 times multiple, which remains unchanged, to the firm's estimated 2026 earnings per share.
InvestingPro Insights
Interactive Brokers Group (NASDAQ:IBKR) has been catching the eyes of investors and analysts alike with a series of promising indicators. An InvestingPro Tip highlights that the company is trading at a low P/E ratio relative to near-term earnings growth, currently standing at 19.55, which could signal an attractive valuation for growth-oriented investors. Additionally, the firm has shown a commitment to shareholder returns, maintaining dividend payments for 15 consecutive years, with a modest yield of 0.36% as of the latest data.
On the performance front, Interactive Brokers has experienced a strong return over the last three months, with a price total return of 32.65%, and is trading near its 52-week high, at 99.48% of the peak. This momentum is reflective of the company's solid financials, with a reported revenue growth of 39.56% in the last twelve months as of Q4 2023. Analysts are optimistic about the company's profitability, predicting it will be profitable this year, a sentiment supported by a robust operating income margin of 71.24%.
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