Interactive Brokers is the IBD Stock of the Day as shares trade near a buy point after Tuesday's breakout.
The online brokerage firm's profit growth has slowed over the past several quarters. Interactive Brokers averaged earnings-per-share gains of 21.4% in the past three quarters, according to IBD Stock Checkup. Yet the stock has one of the highest EPS Ratings in IBD's investment banks and brokers industry group thanks to solid long-term profit growth of 35%.
Analysts expect 2025 earnings to grow a modest 5% after surging 42% and 22% in the previous two years, according to FactSet. Revenue growth is also expected to moderate, growing 6% this year after it rose 42% and 20% in 2023 and 2024.
Interactive Brokers Is On A Roll
Nonetheless, the brokerage has some momentum going.
Interactive Brokers stock climbed back above the 50-day moving average on May 2. The previous day, the company reported strong April metrics and Goldman Sachs raised its price target on the stock to 212 from 207. The firm kept a buy rating.
Goldman analysts cited Interactive's 63% surge in Daily Average Revenue Trades from a year ago, and a 10% increase from March. The brokerage reported a 32% increase in client accounts to 3.71 million, and a 3% rise from the previous month.
Goldman also noted that the brokerage's app downloads and monthly active users continue to trend higher than 2023-24 averages, per a summary from TheFly.com.
Stock Split
The brokerage is best known for sophisticated tools for active traders. It has been expanding its offerings in crypto trading. This month, Interactive Brokers announced 24-hour trading of Forecast Contracts, through which traders can make bets on economic, government or climate events.
It also offers trading in dozens of foreign markets and in multiple foreign currencies. In fact, global trading is a principal business. About 84% of its customers live outside the U.S. in more than 200 countries and territories, according to the company's Q1 filing with the SEC.
In its Q1 earnings report released April 15, Interactive Brokers announced a 4-for-1 stock split. Splits aim to lure more buyers into a stock by lowering the price. But they can also indicate that "management is getting overly optimistic" about the company's near-term prospects.
Investor's Business Daily's stock-market research finds excessive splits — such as 4-for-1 or multiple splits within a year — take place when a stock goes into the final stage of a long-term advance. So investors should approach splits cautiously.
The split becomes effective at the start of trading on June 18. Shares currently trade around 211.
The company also raised its quarterly dividend from 25 cents a share to 32 cents, payable June 13 to shareholders of record as of May 30.
Interactive Brokers Tops Buy Point
Interactive Brokers stock broke out above the 210.46 buy point of a 14-week cup-with-handle base. Shares traded just above the entry Wednesday morning.
The base was deeper than normal, with a total decline of 44%. That makes it harder for shares to rally into new highs. Yet the deep correction helped the stock by undercutting the previous base (from November to January) and resetting the base count.
As the stock began to recover in April, volume trended lower than during its February-March decline. That negative tilt is why the Accumulation/Distribution Rating is only D-. The Composite Rating is 97.
Interactive Brokers stock has a 21-day average true range of 3.02%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
