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Interactive Brokers (IBKR) Rises 33.6% YTD: Is More Upside Left?
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Shares of Interactive Brokers (IBKR - Free Report) have appreciated 33.6% so far this year, outperforming 20.1% growth recorded by the industry it belongs to. Also, the stock has gained considerably more than the S&P 500’s rally of 16.9% in the same time frame.
The impressive year-to-date price performance marks a significant rebound from last year’s performance. In 2019, the brokerage firm’s shares witnessed a decline of 14.7%.
Despite the lingering concerns related to the coronavirus pandemic, Interactive Brokers’ 2020 performance has gotten support from its continued efforts to develop proprietary software along with an increase in emerging market customer base. Along with these, a steady rise in Daily Average Revenue Trades (“DARTs”) aided top-line growth. In the first nine months of this year, the company’s net revenues grew 12.7% year over year.
Year-to-Date Price Performance
Additionally, earnings estimates for this Zacks Rank #3 (Hold) stock has been witnessing upward revisions of late, reflecting analysts’ optimism regarding its growth potential. Over the past 30 days, the Zacks Consensus Estimate for Interactive Brokers’ 2020 and 2021 earnings has moved 1.3% and 2% upward, respectively.
Now let’s check out some of the major factors that are likely to provide further impetus to Interactive Brokers’ stock.
Growth/Expansion Initiatives: Earlier this month, the company inked a deal to acquire Folio Investments’ “self-directed” retail brokerage division, which will likely further strengthen its position in the online brokerage space.
Notably, Folio Investments is a subsidiary of Folio Financial, Inc., which was acquired by Goldman Sachs (GS - Free Report) in September 2020.
Moreover, Interactive Brokers is expected to set up a new entity in Ireland and is planning a hiring spree in the region in preparation for Britain’s exit from the European Union. While Brexit is a major reason for this, the company is also aiming to establish subsidiaries around the world to support its rapid global growth.
Recently, it opened an office in Hungary and earlier in 2020, it opened one in Singapore. Currently, Interactive Brokers has entities in Ireland, Australia, Canada, Hong Kong, Hungary, India, Japan, Luxembourg, Singapore and the U.K.
Technological Upgradation: Since inception, Interactive Brokers has mainly been focusing on developing proprietary software to automate its broker-dealer functions. Driven by these efforts, its total net revenues witnessed a compound annual growth rate (“CAGR”) of 18.3% over the six-year period ended 2019. Moreover, with the launch of IBKR Lite, investors are able to trade commission free. This is expected to result in a rise in the company's market share, going forward.
Further, the launch of Impact Dashboard, an innovative sustainable investing tool, has made the company the first major brokerage firm to allow investors to easily align their portfolio with their values.
Thus, driven by its restructuring efforts, the top line is expected to continue to improve in the near term.
Favorable Brokerage Data: Interactive Brokers’ performance metrics for its Electronic Brokerage segment (which deals with the clearance and settlement of trades for individual and institutional clients globally) has been impressive this year.
Last month, the company’s total client DARTs were 2,290,000, surging 179% from November 2019. Also, at the end of last month, total customer accounts were 1.04 million, which climbed 52% from the prior-year month. Net new accounts were 29,300, soaring 266% from November 2019.
The rise was mainly due to the significant increase in trading activities, owing to the pandemic. Given the second wave of the pandemic hitting most countries leading to an uncertain economic environment once again, a similar trend in trading activities is expected to continue next year as well.
Earnings Strength: Interactive Brokers’ earnings have witnessed growth of 20.1% in the past three-five years, higher than the industry’s rise of 17%. The upward momentum is anticipated to continue in the near term. In 2020, earnings are projected to grow 3.1%.
Favorable Zacks Industry Rank: Interactive Brokers is part of that Zacks industry, which currently carries a Zacks Industry Rank #19 (placing it at the top 7% of more than 250 Zacks industries).
The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Key Industry Picks
A couple of stocks from the same space worth a look are mentioned below.
Morgan Stanley (MS - Free Report) has witnessed an upward earnings estimate revision of 1.1% for 2020 over the past 60 days. This Zacks Rank #2 (Buy) stock has appreciated 40.7% over the past three months.
The Charles Schwab Corporation’s (SCHW - Free Report) current-year earnings estimates rose 8.8% in 60 days’ time. Further, the company’s shares have appreciated 46.1% over the past three months. At present, it carries a Zacks Rank #2.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Interactive Brokers (IBKR) Rises 33.6% YTD: Is More Upside Left?
Shares of Interactive Brokers (IBKR - Free Report) have appreciated 33.6% so far this year, outperforming 20.1% growth recorded by the industry it belongs to. Also, the stock has gained considerably more than the S&P 500’s rally of 16.9% in the same time frame.
The impressive year-to-date price performance marks a significant rebound from last year’s performance. In 2019, the brokerage firm’s shares witnessed a decline of 14.7%.
Despite the lingering concerns related to the coronavirus pandemic, Interactive Brokers’ 2020 performance has gotten support from its continued efforts to develop proprietary software along with an increase in emerging market customer base. Along with these, a steady rise in Daily Average Revenue Trades (“DARTs”) aided top-line growth. In the first nine months of this year, the company’s net revenues grew 12.7% year over year.
Year-to-Date Price Performance
Additionally, earnings estimates for this Zacks Rank #3 (Hold) stock has been witnessing upward revisions of late, reflecting analysts’ optimism regarding its growth potential. Over the past 30 days, the Zacks Consensus Estimate for Interactive Brokers’ 2020 and 2021 earnings has moved 1.3% and 2% upward, respectively.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Now let’s check out some of the major factors that are likely to provide further impetus to Interactive Brokers’ stock.
Growth/Expansion Initiatives: Earlier this month, the company inked a deal to acquire Folio Investments’ “self-directed” retail brokerage division, which will likely further strengthen its position in the online brokerage space.
Notably, Folio Investments is a subsidiary of Folio Financial, Inc., which was acquired by Goldman Sachs (GS - Free Report) in September 2020.
Moreover, Interactive Brokers is expected to set up a new entity in Ireland and is planning a hiring spree in the region in preparation for Britain’s exit from the European Union. While Brexit is a major reason for this, the company is also aiming to establish subsidiaries around the world to support its rapid global growth.
Recently, it opened an office in Hungary and earlier in 2020, it opened one in Singapore. Currently, Interactive Brokers has entities in Ireland, Australia, Canada, Hong Kong, Hungary, India, Japan, Luxembourg, Singapore and the U.K.
Technological Upgradation: Since inception, Interactive Brokers has mainly been focusing on developing proprietary software to automate its broker-dealer functions. Driven by these efforts, its total net revenues witnessed a compound annual growth rate (“CAGR”) of 18.3% over the six-year period ended 2019. Moreover, with the launch of IBKR Lite, investors are able to trade commission free. This is expected to result in a rise in the company's market share, going forward.
Further, the launch of Impact Dashboard, an innovative sustainable investing tool, has made the company the first major brokerage firm to allow investors to easily align their portfolio with their values.
Thus, driven by its restructuring efforts, the top line is expected to continue to improve in the near term.
Favorable Brokerage Data: Interactive Brokers’ performance metrics for its Electronic Brokerage segment (which deals with the clearance and settlement of trades for individual and institutional clients globally) has been impressive this year.
Last month, the company’s total client DARTs were 2,290,000, surging 179% from November 2019. Also, at the end of last month, total customer accounts were 1.04 million, which climbed 52% from the prior-year month. Net new accounts were 29,300, soaring 266% from November 2019.
The rise was mainly due to the significant increase in trading activities, owing to the pandemic. Given the second wave of the pandemic hitting most countries leading to an uncertain economic environment once again, a similar trend in trading activities is expected to continue next year as well.
Earnings Strength: Interactive Brokers’ earnings have witnessed growth of 20.1% in the past three-five years, higher than the industry’s rise of 17%. The upward momentum is anticipated to continue in the near term. In 2020, earnings are projected to grow 3.1%.
Favorable Zacks Industry Rank: Interactive Brokers is part of that Zacks industry, which currently carries a Zacks Industry Rank #19 (placing it at the top 7% of more than 250 Zacks industries).
The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Key Industry Picks
A couple of stocks from the same space worth a look are mentioned below.
Morgan Stanley (MS - Free Report) has witnessed an upward earnings estimate revision of 1.1% for 2020 over the past 60 days. This Zacks Rank #2 (Buy) stock has appreciated 40.7% over the past three months.
The Charles Schwab Corporation’s (SCHW - Free Report) current-year earnings estimates rose 8.8% in 60 days’ time. Further, the company’s shares have appreciated 46.1% over the past three months. At present, it carries a Zacks Rank #2.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>