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On Wednesday, JPMorgan updated its outlook on Futu Holdings Limited (NASDAQ:FUTU) shares, significantly increasing the stock's price target from $88.00 to $160.00, while maintaining an Overweight rating. The adjustment reflects an 82% rise in the price target set for December 2024.
The firm's optimism about Futu Holdings is driven by several factors, including the improving retail sentiment in Hong Kong SAR and mainland China. As a substantial portion of Futu's clientele and their assets under management (AUM) are based in the Greater China regions, the company is expected to greatly benefit from these positive changes in investor mood.
Moreover, JPMorgan finds the valuation of Futu Holdings to be reasonable, citing an estimated price-to-earnings (P/E) ratio of around 15 times for the year 2025, which is lower than the Bloomberg consensus of 20.8 times. This valuation takes into account the anticipated strong growth in client assets and an increase in turnover volume.
Futu Holdings is also considered a high-quality investment aligned with the KWEB (China Internet Index). JPMorgan's Internet analysts hold a positive view of Chinese Internet companies, such as Alibaba (NYSE:BABA), and recognize Futu's solid fundamentals and robust growth momentum overseas. The new stock price target of $160 is based on the expected trading velocity in 2025 and an average client asset projection of HK$820 billion.
Under the most optimistic 'blue-sky' scenario, where trading velocity returns to the peak levels seen in 2021, JPMorgan suggests that Futu's earnings in 2025 could increase by an additional 23%. The firm reiterated its Overweight rating, signaling confidence in the stock's performance.
InvestingPro Insights
Recent data from InvestingPro aligns with JPMorgan's bullish outlook on Futu Holdings Limited (NASDAQ:FUTU). The stock has shown remarkable performance, with a 94.19% price total return over the past six months and a 96.85% return year-to-date. This strong momentum is reflected in the stock trading near its 52-week high, with the current price at 99.02% of its peak.
Futu's financial metrics support its growth narrative. The company boasts a robust gross profit margin of 92.99% and an operating income margin of 52.84% for the last twelve months as of Q2 2024, indicating efficient operations and strong profitability. Revenue growth remains positive at 9.98% over the same period, with quarterly revenue growth accelerating to 21.5% in Q2 2024.
InvestingPro Tips highlight that Futu has been profitable over the last twelve months, and analysts predict continued profitability this year. However, investors should note that the stock is trading at a high P/E ratio of 27.18 relative to its near-term earnings growth, suggesting a premium valuation that aligns with JPMorgan's assessment of the company's growth potential.
For readers interested in a deeper analysis, InvestingPro offers 13 additional tips for Futu Holdings, providing a comprehensive view of the company's financial health and market position.
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