On Friday, JPMorgan issued a rating change for NASDAQ:FUTU, the stock of Futu Holdings (NASDAQ:FUTU) Limited, moving from Overweight to Neutral. The investment firm also adjusted the price target to $62.00, a slight decrease from the previous $64.00. This decision followed a significant 14% drop in Futu's share price on Thursday, which contrasted with a marginal 0.3% decline in the Nasdaq Index.
The downgrade comes as JPMorgan anticipates challenges for Futu in the upcoming year. The firm pointed out several factors that could hinder the company's revenue growth, including potential impacts from Federal Reserve rate cuts on interest income. Additionally, while client acquisition costs are expected to decrease, this benefit may be negated by increased expenses related to expanding into new markets and growing the workforce.
Futu's strategy to grow its paying client base is seen as positive, yet concerns remain that the average assets under management (AUM) per client could be lower in these new markets, which may affect overall AUM growth. Despite an acceleration in paying client growth in 2024, the firm suggests that the anticipated launch of cryptocurrency products in the second half of 2024 is unlikely to significantly contribute to earnings within the year.
In light of these considerations, JPMorgan has revised its earnings estimates for Futu downward for the years 2024 through 2026 by 9%, 7%, and 10%, respectively. The revised December 2024 price target reflects a 3% reduction from the prior target, aligning with the firm's expectation of limited upside for Futu's stock until the company demonstrates effective monetization of its overseas expansion and product diversification efforts.
Futu Holdings stock is down 2.7% on Friday.
InvestingPro Insights
In tandem with JPMorgan's recent rating update, investors might find additional insights from InvestingPro metrics and tips for Futu Holdings Limited (NASDAQ:FUTU). The company is trading at a P/E ratio of 13.84, which appears modest when juxtaposed with its near-term earnings growth. This is further accentuated by an adjusted P/E ratio for the last twelve months as of Q4 2023, which sits at 14.1.
Moreover, Futu's PEG ratio during the same period is an attractive 0.17, suggesting that the stock's price is potentially undervalued in relation to its earnings growth. This could be a point of interest for investors seeking growth at a reasonable price. The company's revenue growth of 24.26% for the last twelve months as of Q4 2023 also underscores a robust upward trajectory, despite the market's short-term reactions.
InvestingPro Tips highlight that analysts predict Futu will be profitable this year, which aligns with the company's history of profitability over the last twelve months. Additionally, Futu has demonstrated strong returns over the last five years, although it does not pay a dividend to shareholders. For investors keen on exploring these facets further, there are additional InvestingPro Tips available, offering deeper analytical perspectives on Futu's financial health and market potential.
For those considering a subscription to InvestingPro for a comprehensive analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With this subscription, investors can access a wealth of information, including the six total InvestingPro Tips for Futu Holdings Limited, to help inform their investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.