Digital Adoption And DeFi Will Expand Global Trading Markets

Key Takeaways

• B2B platform expansion and integration of digital assets position CMC for strong recurring income and sustained growth amid shifting industry trends and generational wealth transfer.
  
• Investments in automation and scalable infrastructure enable robust margins and operational efficiency as CMC capitalizes on rising global trading activity and evolving investor preferences.
  
• Heavy reliance on active retail trading, regulatory risks, and limited diversification threaten CMC Markets' profitability amid intensifying competition, rising compliance costs, and evolving market trends.

Catalysts

Provides a platform for investing, trading, and brokerage in the United Kingdom, Australia, and internationally.

• While analysts broadly agree that B2B partnerships and platform expansion will drive growth, the scale and embedded nature of CMC's PTAS business-with nearly 400 institutional partners and API connections-suggests CMC can rapidly unlock exponential revenue growth and recurring, high-margin income as the industry increasingly transitions to multi-asset and Web 3.0 capabilities.
  
• Analyst consensus highlights operational efficiency gains, but the group's heavy investment in automation, global infrastructure, and modular API-driven systems positions CMC for accelerating operating leverage, enabling robust net margins and double-digit earnings growth even as it scales product delivery to new geographies and client segments.
  
• CMC's end-to-end DeFi and Web 3.0 infrastructure, including tokenization, digital wallets, and 24/7 multi-asset trading, directly aligns with the global surge in digital finance adoption and the growing demand among younger and tech-savvy investors, supporting sustained increases in client engagement, asset flows, and transaction-based revenues.
  
• The platform's seamless integration of traditional and next-generation financial products-spanning equities, options, crypto, and tokenized assets-capitalizes on the ongoing generational wealth transfer and the shift in global investor preferences, unlocking both market share gains and long-term growth in recurring AUM and fee-based income.
  
• With retail trading activity rising, financial education broadening globally, and market volatility remaining elevated, CMC's scalable, accessible, and borderless trading platform is uniquely positioned to benefit from structural tailwinds that drive higher transaction volumes and fee growth without significant incremental cost, setting the stage for outperformance in both revenue and profitability.

CMC Markets Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on CMC Markets compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming CMC Markets's revenue will grow by 4.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 18.4% today to 18.0% in 3 years time.
• The bullish analysts expect earnings to reach £68.7 million (and earnings per share of £0.25) by about July 2028, up from £62.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.4x on those 2028 earnings, up from 10.6x today. This future PE is greater than the current PE for the GB Capital Markets industry at 13.4x.
• Analysts expect the number of shares outstanding to decline by 1.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.22%, as per the Simply Wall St company report.

CMC Markets Future Earnings Per Share Growth

Risks

• CMC Markets faces increasing regulatory scrutiny and global tightening across financial markets, as demonstrated by sector-wide remediations such as the Australia provision, which could lead to higher compliance costs and product restrictions, ultimately compressing net margins and reducing overall group profitability over time.
  
• The company remains heavily reliant on revenue and earnings from highly active retail clients, making its performance sensitive to market volatility and secular shifts such as the rise of passive investing, which threatens to structurally diminish core trading volumes and have a negative impact on long-term revenue.
  
• Expanding into non-leveraged investment products and emerging DeFi and Web 3.0 verticals presents execution and regulatory risk, and challenges in achieving significant diversification outside core UK/Australia/Europe markets may leave CMC's earnings and group revenue exposed to regional concentration and sector trends.
  
• Industry consolidation and advances in fintech, as well as the commoditization of online trading products, mean that larger or more nimble competitors could erode CMC's commission rates, put downward pressure on average revenue per user, and force higher technology spending to keep pace-ultimately reducing net margins.
  
• Shifting regulatory landscapes, such as potential leverage restrictions or bans on CFDs and related products, could sharply reduce accessible client pools and addressable revenues, especially as digital asset adoption and tokenization evolve, thereby putting significant pressure on future revenue growth.

Valuation

• The assumed bullish price target for CMC Markets is £3.8, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of CMC Markets's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £3.8, and the most bearish reporting a price target of just £2.22.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be £382.3 million, earnings will come to £68.7 million, and it would be trading on a PE ratio of 18.4x, assuming you use a discount rate of 8.2%.
• Given the current share price of £2.42, the bullish analyst price target of £3.8 is 36.4% higher.
• 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.