Plus500 2021 earnings earn another upgrade from Liberum

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Israeli based and London-listed CFD broker Plus500 has been positively written up by Liberum, following preliminary results for the year ending Dec 31st 2021 and the city scribes like what they see.

Liberum Plus500 upgrade & price target

Plus500 is a corporate client of UK stockbroker Liberum, so the broker wouldnt rush, to publish a negative comment on the stock.

However, the new research note is not just a piece of padding.

Instead, it makes the case for a 2500p price target and argues that the stock should be seen as genuine Fintech and not just as a retail-focused margin trading broker, not least because Plus500 has developed proprietary dealing platforms, as well as middle and back-office software.

Plus500 as a fintech?

Liberum focuses on the fact that $200.0 million will be returned to shareholders through dividends and share buybacks relating to FY 2021 performance. A $55.0 million share buyback was announced alongside Plus500’s results this morning, as well as a 22.18 cent special dividend.

The firm’s multi-asset fintech strategy continues to be highly cash-generative, and cash reserves have now reached $750.0 million, and represent just over a third of the current market cap of $2.0 billion.

The reserves are also well in excess of Plus500’s regulatory capital requirements of $450.0 million, and operating cash conversion at the group is currently running at 99.0%.

The use of US dollars tells us that Plus500’s orientation is moving stateside, and indeed Liberum sees the US market as being a key driver of future growth at the company, which now has more than 22.0 million registered customers.

Liberum acknowledges that both the revenue and customer income generated in 2021 were down on the corresponding figures for 2020.

However, they note that both metrics were well up versus their pre-pandemic equivalents.

2021 revenue was more than double that seen in 2019 and customer income in 2021 eclipsed the 2019 figures by +84.0%.

The number of customer trades executed in 2021 hit 57.0 million, down from 2020’s 82.0 million, but well above the 35.0 million trades processed in 2019.

Lower client churn rates of 51.4% and higher customer acquisition numbers (+196,000 in FY 2021) are also highlighted as positives for the company.

Plus500 stock price reaction

The wider market seems to have taken the view that it was better to travel than arrive, and Plus500 stock has fallen by -123.50p or -8.37% in Tuesday morning’s session.

The stock had gained more than +11.0% over the last three months and had printed as high as 1544.50p in that time.

Traders and investors seem to have focused on a decline in ARPU or Average Revenue Per User, which fell by -12.0% to $1764.0 in 2021, from $2009.0 in 2020.

And they are choosing to overlook the buyback and special dividend.

Markets are forward-looking of course, rightly or wrongly they seem to have expected growth at Plus500 to continue at the inflated levels of the pandemic, which was always going to be unlikely.

That sort of treatment is one of the reasons that Liberum is encouraging investors to view the company as a fintech, and not just a trading business.

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