New Trading Features And Germany Expansion Will Attract Active Clients

Key Takeaways

• Nordnet's new high-end features and German market expansion could attract active traders and grow revenue opportunities.
  
• Scalable, cloud-powered tech enhances cost control, improving margins by curbing cost growth relative to revenue expansion.
  
• Market volatility and reduced buying signal potential revenue instability, with increased expenses challenging net margins unless offset by revenue growth.

Catalysts

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

• Nordnet is launching new features aimed at high-end and active trading segments, such as algorithmic order executions and U.S. pre-market trading, which could attract more active traders and boost brokerage revenues.
  
• The upcoming expansion into Germany represents a significant growth opportunity, potentially increasing customer base and revenue in a new market.
  
• Continued strong growth in the Danish pension product, driven by Livrente, which could bolster net savings and fund-related revenue streams.
  
• Enhanced focus on the fund business, with a significant share of net inflows going into Nordnet-branded index funds, could increase revenue from higher-margin fund-related activities.
  
• The company's scalable and cloud-powered tech platform supports cost control and operational efficiency, potentially improving net margins through reduced cost growth relative to revenue expansion.

Nordnet Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Nordnet's revenue will grow by 2.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 47.7% today to 55.4% in 3 years time.
• Analysts expect earnings to reach SEK 3.5 billion (and earnings per share of SEK 14.1) by about May 2028, up from SEK 2.8 billion 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 22.6x on those 2028 earnings, up from 22.5x today. This future PE is greater than the current PE for the SE Capital Markets industry at 18.0x.
• Analysts expect the number of shares outstanding to decline by 0.53% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.14%, as per the Simply Wall St company report.

Nordnet Future Earnings Per Share Growth

Risks

• The slowdown in net buying during the quarter, especially in March, indicates a potential future decline in trading revenue as market conditions lead to outflows from funds and a rotation from the U.S. to Europe.
  
• The reduction in savings capital due to currency fluctuations and negative market performance points to risks impacting overall revenue figures.
  
• The forecasted increase in operating expenses—anticipated to grow by 8% excluding Germany—could impact net margins if not matched by corresponding revenue increases.
  
• Ongoing market turbulence and temporary boosts to trading from volatility might not sustain trading volume and could result in unstable revenue streams.
  
• Dependence on volatility for increased customer activity may pose a risk; prolonged market volatility can decrease customer interest in savings and investments, negatively affecting revenues and margins.

Valuation

• The analysts have a consensus price target of SEK256.3 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 SEK293.0, and the most bearish reporting a price target of just SEK215.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK6.3 billion, earnings will come to SEK3.5 billion, and it would be trading on a PE ratio of 22.6x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of SEK254.0, the analyst price target of SEK256.3 is 0.9% higher. 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.