Digital Transformation And German Expansion Will Shape Success

Key Takeaways

• Strong customer growth and digital innovation are driving user engagement, supporting higher revenue, customer retention, and long-term platform expansion.
  
• Geographic and product diversification efforts, alongside disciplined cost control, are boosting margin stability and reducing reliance on commission-based income.
  
• Rising costs, heightened price competition, and reliance on volatile trading activity threaten margins, while expansion efforts and sluggish deposit growth could further constrain profitability.

Catalysts

Operates a digital platform for savings and investments in Sweden, Norway, Denmark, and Finland.

• Ongoing strong customer growth (14% YoY) and net savings momentum (over SEK 1 trillion in platform savings) indicate continued expansion in individual participation in capital markets, which supports future revenue and earnings growth as more users engage with Nordnet's platform for investing, trading, and saving.
  
• The company's intensified focus on digital product innovation-including high-frequency feature releases (e.g., introduction of new trading venues, currency accounts, seamless onboarding, generative AI news)-suggests it is well-positioned to capture benefits from the broader digital transformation of financial services, driving up both user acquisition and long-term retention, which should boost revenue and lifetime customer value.
  
• Recent launches targeting high-value customer segments-such as the new digital-first, tiered private banking offering with clear, attractive benefits-create new, scalable avenues to attract and retain larger accounts and assets under management, supporting margin expansion and more stable fee income.
  
• Nordnet's imminent geographic expansion into the much larger German market, alongside continued growth initiatives in funds, pensions, and other product verticals, will diversify and broaden revenue streams, reduce reliance on trading commission income, and provide additional earnings upside opportunities.
  
• The firm's proven operating leverage and disciplined cost control (revenue growth of 25% per year since 2019 outpacing 7% cost growth) set the stage for continued net margin and earnings improvement as its technology-driven business model scales across a growing pan-European customer base.

Nordnet Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Nordnet's revenue will grow by 3.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 47.3% today to 55.7% in 3 years time.
• Analysts expect earnings to reach SEK 3.6 billion (and earnings per share of SEK 14.51) by about August 2028, up from SEK 2.8 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as SEK3.2 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.3x on those 2028 earnings, down from 23.8x today. This future PE is lower than the current PE for the SE Capital Markets industry at 23.7x.
• Analysts expect the number of shares outstanding to decline by 0.39% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.63%, as per the Simply Wall St company report.

Nordnet Future Earnings Per Share Growth

Risks

• Sustained cost increases outpacing revenue growth-operating expenses excluding Germany rose 9.7% year-on-year and total costs up 13%, while revenues remain flat year-on-year; if current revenue momentum does not accelerate, this could compress net margins and earnings.
  
• Evidence of ongoing and possibly intensifying price competition, especially in the Nordics; recent reduction in platform fees in Norway due to aggressive pricing by large competitors (e.g., Storebrand/KLP), which could signal future fee compression impacting revenue and margin if similar moves are needed in other markets or segments.
  
• Heavy reliance on trading activity and market volatility to support short-term revenue-recent increases in trading per customer and income per trade are attributed to tariff-induced volatility; if volatility declines and market sentiment weakens, trading volumes, commission income, and AUM may stagnate or fall, affecting core revenue streams.
  
• Slowing deposit growth relative to savings capital and normalized rates (deposit/savings capital ratio now around 8%, previously above 10%), along with dependence on episodic factors like high dividends; a persistent "lower-for-longer" interest rate environment could cap net interest income growth and lower structural profitability.
  
• Risks surrounding expansion into the German market and platform innovation-while there is significant long-term opportunity, execution risk and increased investment in staff, development, and marketing could elevate costs without near-term revenue offset, pressuring net margin and potentially delaying earnings growth.

Valuation

• The analysts have a consensus price target of SEK266.5 for Nordnet 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 SEK300.0, and the most bearish reporting a price target of just SEK220.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK6.5 billion, earnings will come to SEK3.6 billion, and it would be trading on a PE ratio of 23.3x, assuming you use a discount rate of 8.6%.
• Given the current share price of SEK267.4, the analyst price target of SEK266.5 is 0.3% 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.