Expanding Product Range With Crypto Trading Will Broaden Future Market Reach

Key Takeaways

• Expansion and diversification efforts aim to boost revenue growth and improve net margins through operational efficiency.
  
• Increased customer base and new products like crypto trading target revenue growth and expanded market offerings.
  
• Regulatory challenges, interest rate declines, competition, platform integration costs, and execution risks in product launches may all impact flatexDEGIRO's future revenue and margins.

Catalysts

Provides online brokerage and IT solutions in the areas of finance and financial technology services in Europe.

• FlatexDEGIRO plans to expand its existing business, diversify its product range, and improve operational efficiency. These steps are expected to drive revenue growth and enhance net margins.
  
• The company has significantly increased its customer base, with a focus on reducing acquisition costs. This ongoing growth is poised to boost revenues in the future.
  
• FlatexDEGIRO's launch of new products, including crypto trading, is aimed at increasing its market offerings and could impact revenue positively as these products gain traction.
  
• By targeting a broader geographic scope and increasing local presence, flatexDEGIRO aims to capitalize on new market opportunities, potentially increasing revenues.
  
• Planned initiatives to increase cost savings and operational efficiency could lead to improved net margins and support earnings growth.

flatexDEGIRO Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming flatexDEGIRO's revenue will grow by 8.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 24.1% today to 30.7% in 3 years time.
• Analysts expect earnings to reach €183.5 million (and earnings per share of €1.65) by about March 2028, up from €111.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.1x on those 2028 earnings, down from 21.3x today. This future PE is lower than the current PE for the DE Capital Markets industry at 22.5x.
• Analysts expect the number of shares outstanding to decline by 1.77% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.59%, as per the Simply Wall St company report.

flatexDEGIRO Future Earnings Per Share Growth

Risks

• flatexDEGIRO has faced challenges in keeping up with regulatory requirements in the past, which may pose risks to operational stability and potentially impact future net margins if further regulatory issues arise.
  
• The expectation of falling interest rates in 2025 and 2026 may lead to a decline in interest income, impacting the company's revenue streams, especially given the significant portion of income derived from interest.
  
• Growing competition in active markets and the challenge of reactivating inactive customers may slow down customer growth, which could affect future revenues.
  
• The anticipated costs associated with integrating IT platforms and reducing headcount may not result in immediate cost savings, potentially impacting net margins in the short term.
  
• Dependencies on new product launches, such as crypto trading and securities lending, introduce execution risks, and any delays or market rejection could impact revenue diversification efforts and overall earnings.

Valuation

• The analysts have a consensus price target of €19.955 for flatexDEGIRO based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €24.0, and the most bearish reporting a price target of just €15.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €597.5 million, earnings will come to €183.5 million, and it would be trading on a PE ratio of 13.1x, assuming you use a discount rate of 5.6%.
• Given the current share price of €22.0, the analyst price target of €19.95 is 10.3% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.