Futu Holdings has resisted this week's stock market drop, as its leadership in the financial sector proves its value to investors. Futu is the IBD Stock of the Day.
The brokerage is benefiting from a rebound in China's stock markets. The iShares MSCI China ETF is up 38% year to date, and 43% since its April low. Futu stock is way ahead, up 134% from the April bottom and more than 120% year to date.
Futu's fundamentals, however, make you believe the stock would still be a leader without the benefit of a rallying China stock market. The company's earnings in U.S. dollars jumped 27%, 122%, 89% and 103% the past four quarters. Sales increased 30%, 88%, 80% and 69%.
No wonder, Futu has one of the highest EPS Ratings and SMR Ratings in the investment bank and brokers industry group. Its Composite Rating of 99 is the highest in the industry, according to IBD MarketSurge.
Most analysts are bullish, with a consensus earnings estimate this year of $8.67 a share, an increase of 63%. They expect revenue to climb 44% to $2.520 billion.
Analysts Bullish On Futu Stock
The most recent analyst note came out Monday, when JPMorgan raised the firm's price target to 270 from 200 and kept an overweight rating. That's the highest price target among the 22 analysts who cover the company, according to FactSet.
JPMorgan also raised its estimates on Futu, citing significant growth in clients, assets under management, revenue and profit since last year. Analysts said the stock is trading at a discount to peers, TheFly.com reported.
Futu provides investment services, including wealth management, with a primary focus on China's emerging affluent population. The firm has operations in Hong Kong, Singapore, the U.S., Australia, Japan, Canada, Malaysia and New Zealand. Its Futubull and Moomoo trading apps are available in the U.S.
Earlier this year, Futu became an official sponsor of the New York Mets baseball club as the firm tries to broaden its brand reach in the U.S. CEO Leaf Hua Li told analysts that Singapore and the U.S. are Futu's largest international markets, while the Malaysia and Japan businesses are growing quickly.
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In its Aug. 20 earnings report, the company said brokerage accounts rose 29.6% year-over-year to 5,243,591 in the second quarter while client assets increased 68.1%. Trading volume climbed 121.2%.
Market volatility from trade tensions in early April, the sharp rebound that followed, plus a wave of high-profile IPOs in May spurred trading by retail investors, the CEO said.
Futu Stock Analysis
Futu stock is finding support at its 10-week moving average, testing the line for the first time since shares broke out of a cup-with-handle base in June. The stock is up 50% from that 118.52 buy point, so the support at the 10-week line comes at a good time to possibly add shares.
In this situation, the Sept. 19 high of 178.06 can provide a viable entry. The 21-day exponential moving average is near 177.50 and a move above that level is another possible entry. Futu traded near both levels Thursday morning. The stock has come off the week's lows.
Futu stock has a 21-day average true range (ATR) of 4.78%. The average true range is a metric in 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 still in a power trend, investors can buy stocks with ATRs up to 8%, though on a limited basis.
Investors who feel unsure about the market could trim some higher ATR holdings, and lock in profit for stocks extended 20% or more from recent breakouts.
