Plus500 the Israeli-based but London-listed margin trading broker has posted its Q1 2023 trading update, which looks impressive in terms of revenue growth, new customer numbers and average revenue per user.
Customers and revenue increase
Plus500 reported that it has grown revenues by 64%, when compared to the final quarter of 2022, the firm generated almost $208 million in income compared to just $126.370 million in Q4 2022.
New customer numbers grew by 10.0% in that period to 28,201, which took the total number of active customers at the broker to just over 137,000.
Not only were customer numbers up, but so was the revenue they produce with ARPU or Average Revenue Per User rising by 57% to $1517 per client.
That compares to an average cost of acquisition per client of $1381, which was down 6.0% from the prior quarter.
Plus 500’s Chief Executive Officer, David Zruia, Chief Executive Officer said of the update:
“Plus500 produced another strong performance in Q1 2023, again driven by our unique proprietary technology stack proposition, which attracts and retains higher value customers over the long term”
He added that:
“We have a range of extremely exciting strategic growth opportunities ahead of us, particularly in the US futures market, enabling us to accelerate our development as a diversified, global multi-asset fintech group.”
The firm’s management believes that its performance over the full year in 2023 will be in line with the market’s expectations and that its cash balance of more than $95.0 million, as of the end of March, means it can continue to invest for the continuation of its strong financial performance.
Those investments include a new big data tool called ” + Insights” which is designed to provide clients with access to information about real-time and historic market, and customer trends.
As well as Plus500 Futures and Trade Sniper, which are proprietary trading platforms, tailored for use in exchange-traded futures markets.
Analysts continue to be positive
Investment Bank Liberum, the firm’s corporate broker, wrote on Plus500 this morning maintaining a buy recommendation on the stock, with a price target of £31.00.
That compares to the current price, at the time of writing of £17.14, which was broadly unchanged on the day.
Over the year to date, Plus500’s stock price has fallen by 5.50%.
However, Liberum believes that at £31.00 Plus500 would only be trading on 12 times 2024 earnings per share.
Plus500 versus IG & CMC
The bank highlights that in the ten years since its IPO, Plus500 has produced cumulative net profits of $2.3 billion, of which, $1.7 billion has been returned to shareholders via dividends and share buybacks.
Which, according to the Liberum analysts equates to an average distribution ratio of 74%. Using a slightly lower benchmark of 70% the bank predicts a shareholder return of 17% from Plus500 shares over the next two years.
There maybe be hidden value in Plus500, but whether that can be realised likely depends on how effectively the firm can diversify its income streams away from OTC margin trading, and into other areas such as Futures trading and the provision of B2B trading technology and infrastructure to third parties.