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On Friday, Morgan Stanley (NYSE:MS) updated its financial outlook on Futu Holdings Limited (NASDAQ:FUTU), increasing the price target from $130.00 to $140.00 while maintaining an Overweight rating on the stock. The adjustment follows stronger-than-expected first-quarter earnings and the anticipation of continued positive performance into the second quarter. According to InvestingPro data, FUTU has demonstrated impressive momentum with a 47% return over the past year and currently trades at a P/E ratio of 18x, suggesting attractive valuation relative to its growth potential.
The firm’s analyst cited several reasons for the optimistic stance, including a 4% increase in projected client assets for 2025 to HK$965 billion, bolstered by significant net inflows year-to-date. Additionally, trading velocity estimates were raised to 15.8 times from the previous 14.5 times. Despite a reduction in net interest income forecasts by 5% for 2025 due to a sharp drop in the Hong Kong Interbank Offered Rate (HIBOR) in May, Morgan Stanley expects other areas to compensate. InvestingPro analysis reveals the company maintains a strong financial position with an impressive 93% gross profit margin and robust revenue growth of 54.5% in the last twelve months.
The research firm anticipates increased investment in research and development, particularly in artificial intelligence (AI), which is likely to enhance client engagement and asset acquisition for Futu. Consequently, R&D spending projections have been raised by 4-5%, with an expectation of continued growth in the low teens annually.
In a positive development for Futu’s cost management, the estimated customer acquisition cost (CAC) for the full year has been lowered to HK$2400 from HK$2500, reflecting better-than-anticipated results in the first quarter. Moreover, the effective tax rate forecast has been adjusted to 17.5%, acknowledging the utilization of previous tax credits in some overseas markets due to improved profitability.
Overall, Morgan Stanley has increased its earnings per share (EPS) forecasts for Futu by 6%, 6.3%, and 7% for the years 2025, 2026, and 2027, respectively. The revised price target of $140 is based on a discounted cash flow (DCF) model and reflects the higher earnings forecast, implying a target price-to-earnings (P/E) ratio of 18 times for the year 2026. InvestingPro subscribers can access the comprehensive Pro Research Report for FUTU, which includes detailed financial analysis, Fair Value estimates, and eight additional exclusive ProTips that could help inform investment decisions. The company currently shows a "GREAT" overall financial health score of 3.55 out of 5, suggesting strong fundamental positioning.
In other recent news, Futu Holdings Limited reported impressive first-quarter earnings, with net income more than doubling to HK$2.14 billion ($275.4 million), up 107% from the previous year. The company’s revenue rose 81.1% year-over-year to HK$4.69 billion, slightly below analyst estimates of HK$4.7 billion. Futu added approximately 262,000 funded accounts in the first quarter, contributing to a total of 2.67 million accounts, marking a 41.6% increase from a year ago. Total (EPA:TTEF) client assets also saw significant growth, rising 60.2% year-over-year to HK$829.8 billion.
Jefferies analyst Zoey Zong has responded to these results by raising Futu’s stock price target from $135.00 to $139.00, while maintaining a Buy rating. This upgrade reflects confidence in Futu’s continued growth and product expansion. The company is also expanding its international presence, with its subsidiary Moomoo recently entering the New Zealand market. Additionally, Futu is making strides in the cryptocurrency market and has unveiled its AI-powered platform, Futubull AI, in Hong Kong, with plans for further international rollout. These developments highlight Futu’s strategy to leverage technology and expand globally.
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