What Lies Ahead for Plus500?

After stellar growth in 2020, shares of the online trading platform provider Plus500 (GB:PLUS) are trading in the red year-to-date. Tough year-over-year comparisons amid a normalization in trading activities led to a decline in its stock price. 

Recent Past

Plus500 delivered revenues of $211.4 million in Q3, which fell about 2% year-over-year. However, it remained significantly above pre-pandemic levels. Notably, Plus500 delivered revenues of $110.6 million in Q3 2019. 

Plus500 attributed the higher revenues compared to the pre-pandemic levels to the consistent strength of customer income and a stable active customer base.

ARPU (average revenue per user) increased by 16% year-over-year in Q3. Moreover, it increased by 27% compared to Q3 2019. The increase in ARPU reflects Plus500’s focus on higher-value customers and investments in customer retention initiatives.

In response to Plus500’s Q3 performance, Martin Price of Jefferies stated that its Q3 revenues came in well ahead of estimates “despite more normal cyclical market conditions.” 

Future Prospects

Looking ahead, Price remains upbeat about Plus500’s prospects and has a price target of 2,000p. 

Price added that the company is “ramping up investment in the nascent US futures & options roll-out and European stockbroking offering.” The analyst expects these initiatives to contribute modestly to FY22 and FY23 revenues. 

Price added, “Our FY22 revenue forecast is unchanged, although we cut EPS by 12% as a result of investment in growth initiatives (US roll-out & stockbroking). We do not incorporate any potential benefit of this in outer years and our FY23 EPS forecast is unchanged. With the stock on 8x FY23 EPS yielding 5% with optionality on growth initiatives and further M&A.” 

On TipRanks, Plus500 has received two Buy ratings for a Moderate Buy consensus rating. 

Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.