US investment bank Jefferies published a 15-page research note on IG Group this week, ahead of the publication of their interim results, which are due on January 27th.
Jefferies is bullish on the stock and has a buy rating and a price target of 1120p up from the prior 1110p.
The bank wrote that:
“Key performance indicators (at IG Group) imply continued strong trading in 2Q and we increase our FY22 EPS estimate by 8% ahead of 1H FY22 results”
Under the most bullish scenario in the Jefferies thesis, they believe IG Group could hit 1300p, some 57% above the current price of 828p at the time of writing.
To justify the upside case Jefferies notes factors such as a positive update from IG’s rival Plus 50.
The US bank also points out that the number of transactions executed through Tradegate, a European trading venue based in Berlin, act as a proxy for retail trading volumes, at firms such as IG Group.
Tradegate volumes rose by +15.0%, QoQ, between September and November 2021.
US options trading volumes were also higher by +8.0%, during that period, which should have benefited IG’s Tastytrade subsidiary.
With all that in mind, Jefferies expects IG to report H1 trading revenue of £460 million, versus a city consensus figure of £429.0 million, and to deliver a profit before tax of £240.0 million.
Which should translate into earnings per share of 45.7p and a dividend per share of 13.0p.
They also assume a dividend payout ratio of 58.0% in the second half of the year which implies a dividend yield of 5.0% based on the current share price.
IG Group’s stock price rose by +4.11% on Jan 20th the day of publication and traded up to a high of 836.0p though that was still more than 5p below the 3-month high for the stock of 841.85p.
Turnover in the stock was elevated as well with just over 781,000 shares changing hands compared to the average daily volume of 464,000 shares.
The consensus price target for IG Group among the six analysts that cover the stock is 1089p and the average rating is buy.
We have less than a week to wait until we find out if that confidence is justified.