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Investing.com -- UBS Global Research has downgraded Swissquote Group Holding SA (SIX:SQN) to “sell” from “neutral,” citing near-term earnings risks and concerns over valuation amid shifting revenue composition, in a note dated Monday.
Shares of the Swiss banking group were down 5% 06:12 ET (10:12 GMT).
The 12-month price target remains at CHF410, roughly 13% below the June 13 share price of CHF471.
The downgrade follows a 35% year-to-date rise in Swissquote shares, driven by earlier strength in trading and crypto markets.
UBS analysts now see this momentum fading. Peer platforms reported slowing retail trading activity in May, and crypto exchange volumes have dropped 41% year-to-date.
UBS forecasts a 25% year-on-year decline in Swissquote’s crypto revenue for 2025 and a 17% drop in net interest income as Swiss rate expectations fall.
Earnings per share estimates have been reduced by 6–10% for 2025–2027. UBS now expects diluted EPS of CHF18.92 in 2025, CHF20.66 in 2026, and CHF23.23 in 2027, all below consensus.
Net profit is projected to fall to CHF283.6m in 2025 from CHF294.2m in 2024. Revenue is expected to decline 2% to CHF644.6m in 2025 before recovering to CHF699.6m in 2026 and CHF771.3m in 2027.
Swissquote’s valuation also raises red flags. It trades at 21.9x forward earnings, more than three standard deviations above historical averages, and at a 15% premium to European peers.
UBS estimates a fair price-to-earnings multiple of 19.3x based on Swissquote’s 2028 earnings mix, which assumes an increased share of banking revenue.
This shift is expected to dilute margins and lower valuation multiples, as banking revenues typically carry lower PEs than trading or crypto income.
Swissquote aims to generate CHF900m in revenue by 2028, with a 40/60 split between non-transaction and transaction income, and a growing share of banking-based transaction revenue.
UBS questions the feasibility of reaching a 90bps revenue margin target by 2028 from 85bps in 2025, citing headwinds from lower net interest margins, increasing competition in crypto from low-cost rivals, and reduced retail trading appetite.
Crypto-related revenues, once a growth driver, are now seen as volatile and at risk. Despite recent gains in crypto market value, UBS sees trading volumes returning to normalised levels.
Crypto is expected to account for 8–10% of revenue through 2027, compared to 5% historically (excluding 2021).
Net interest income, which rose to 34% of total revenue in 2024, is forecast to stabilize around 26% by 2027 due to declining rates, partially offset by growth in USD-denominated client assets. UBS sees about 70bps in net interest margin compression in 2025.