Street Calls of the Week
Investing.com -- UBS Global Research has initiated coverage on European online broker flatexDEGIRO AG with a "buy" rating and a €36.50 price target, implying 17% potential upside from current levels.
The brokerage points to the company’s dual-brand model, combining the flatex and DEGIRO platforms, as a key driver of market share expansion across Europe.
The report said the broker’s structure enables tailored pricing and product offerings, enhancing its ability to compete against regional peers.
UBS expects the company to maintain its lead in customer growth as its scale and brand diversity continue to attract self-directed investors.
UBS projects that flatexDEGIRO’s customer base will expand at a 13% CAGR from 2024 to 2027, compared with 8-12% growth among peers.
The brokerage noted that UBS Evidence Lab’s web and mobile traffic data support this outlook, indicating higher engagement levels than rival platforms.
The company trades at 18x UBS 2026 estimated P/E, which UBS described as inexpensive relative to its 23% three-year EPS growth CAGR, versus 10% for comparable European trading platforms.
UBS’s 2025-27 earnings-per-share estimates are 3-7% higher than consensus, reflecting stronger expectations for customer additions and revenue contributions from new recurring income sources.
The brokerage’s analysis shows flatexDEGIRO has achieved 15% customer growth between 2022 and 2024, outpacing peers that grew at 8-10%.
UBS said this performance underlines the company’s advantage in price competitiveness and geographic reach, with operations in 16 European countries and over 3.3 million customer accounts.
In terms of revenue diversification, UBS highlighted progress in crypto, securities lending, and BPO initiatives, which are expected to reduce the broker’s dependence on transaction-based income.
UBS forecasts other operating income to rise from 4% of total revenue in FY2024 to over 6% by FY2029, with crypto products contributing about 2% to total revenue.
UBS projects 2027 revenue of €687 million and net income of €223 million, above consensus forecasts of €654 million and €210 million.
The analysts expect these gains to be supported by operational leverage from platform harmonisation, which could lift efficiency ratios from 49% in FY2024 to between 55% and 60% by FY2027.
The brokerage noted that while flatexDEGIRO shares have already risen 110% year to date, valuation remains attractive.
The stock trades at a 12% discount to comparable European brokers despite superior earnings growth.
flatexDEGIRO’s business is rooted in commission-based income, which has historically accounted for around 75% of total revenue, with 15% from interest income and 10% from business-to-business services.
UBS expects this mix to evolve, with net interest income increasing to about 26% of total revenue, supported by a non-zero interest rate environment and expansion into recurring product categories.