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IBKR Stock Touches All-Time High: Wait for the Dip or Buy Right Away?
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Interactive Brokers Group (IBKR - Free Report) stock has been rallying since the Federal Reserve announced a jumbo 50 basis point cut in interest rates on Sept. 18. During yesterday’s trading session, the company’s shares hit an all-time high of $136.56 and closed a tad lower at $136.11, skyrocketing 64.2% year to date.
This impressive rise has significantly outpaced the 17% rally of the industry it belongs to and the 19.9% growth of the Zacks S&P 500 composite.
When compared with its close peers in the brokerage space, IBKR’s performance is noticeably stronger. Charles Schwab (SCHW - Free Report) has lost 6.1%, while Tradeweb Markets Inc. (TW - Free Report) stock has soared 34.1% in the same timeframe.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Historically, the S&P 500 Index has posted positive returns 86% of the time in the 12 months following the first rate cut of the cycle. Further, the central bank has signaled two more rate cuts this year and four in 2025. Hence, this global electronic broker is solidly placed to perform well financially.
Even in the first half of 2024, as the equity markets scaled new highs on the back of clarity on several macroeconomic factors, IBKR’s performance was impressive. The company garnered record commission fees as investors took more assertive positions. Also, as of June 30, 2024, its total customer accounts and total customer Daily Average Revenue Trades (DARTs) surged 28%. These majorly supported the company’s total revenues, which jumped 18% year over year.
IBKR witnessed a rise in total customer accounts and total customer DARTs in July and August. This will support top-line growth in the upcoming period. Hence, investors are optimistic about the company’s prospects.
Technical indicators also suggest continued strength for Interactive Brokers. At present, the stock is trading above its 50-day and 200-day moving average, indicating a bullish trend.
50-Day & 200-Day Moving Average
Image Source: Zacks Investment Research
This underscores positive market sentiments and confidence in the company's financial health and prospects.
IBKR processes trades in stocks, futures, options, cryptocurrencies and forex on more than 150 exchanges across several countries and currencies. Unlike many of its peers, the company has a low level of compensation expense relative to net revenues (12% in the first half of 2024) driven by its technological excellence.
Since its inception, Interactive Brokers has been focused on developing proprietary software to automate broker-dealer functions. This has resulted in a steady growth in revenues as commission per trade continues to improve. Net revenues are expected to rise further, given the solid DART numbers.
Interactive Brokers has been undertaking several measures to enhance its global presence and expand its product suite. In August 2024, the company announced that its wholly-owned subsidiary, the CFTC-regulated ForecastEx LLC, started operating. The company’s clients from eligible countries will be able to trade Forecast Contracts on upcoming economic data releases and climate indicators.
Additionally, the company is making efforts to bolster its market share. By launching new products and services, IBKR intends to strengthen its position in the online brokerage space.
Further, the Zacks Consensus Estimate for IBKR’s 2024 and 2025 earnings implies 18.4% and 2% growth, respectively, year over year. Encouragingly, the company is witnessing northbound estimate revisions for the current and the next year.
Estimate Revision Trend
Image Source: Zacks Investment Research
IBKR’s Attractive Valuation
Despite the recent rally in IBKR shares, it appears inexpensive relative to the industry. The company is currently trading at the 12-month trailing price-to-tangible book (P/TBV) ratio of 0.97, below the industry’s 5.06.
Price-to-Tangible Book Ratio (TTM)
Image Source: Zacks Investment Research
Also, the stock is trading well below its peers, Tradeweb and Schwab. At present, TW and SCHW’s 12-month trailing P/TB TTM ratios are 11.17 and 8, respectively.
So, from a valuation perspective, Interactive Brokers’ shares present a compelling buying opportunity. The stock is still undervalued as the market has yet to fully recognize or price the company’s growth prospect.
Buy IBKR Stock Before It’s Too Late
Interactive Brokers has demonstrated remarkable growth and resilience in the electronic brokerage space, significantly outperforming industry benchmarks and key competitors. The company's proprietary software and strategic expansions have translated into substantial financial gains, marking it as a strong contender in the market.
As the Fed continues to lower interest rates, it will act as a tailwind for IBKR. Hence, given the company’s strong fundamentals, cheap valuation and positive estimate revisions, we believe investors should consider parking their cash in the stock at its current levels for solid long-term returns.
Image: Bigstock
IBKR Stock Touches All-Time High: Wait for the Dip or Buy Right Away?
Interactive Brokers Group (IBKR - Free Report) stock has been rallying since the Federal Reserve announced a jumbo 50 basis point cut in interest rates on Sept. 18. During yesterday’s trading session, the company’s shares hit an all-time high of $136.56 and closed a tad lower at $136.11, skyrocketing 64.2% year to date.
This impressive rise has significantly outpaced the 17% rally of the industry it belongs to and the 19.9% growth of the Zacks S&P 500 composite.
When compared with its close peers in the brokerage space, IBKR’s performance is noticeably stronger. Charles Schwab (SCHW - Free Report) has lost 6.1%, while Tradeweb Markets Inc. (TW - Free Report) stock has soared 34.1% in the same timeframe.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Historically, the S&P 500 Index has posted positive returns 86% of the time in the 12 months following the first rate cut of the cycle. Further, the central bank has signaled two more rate cuts this year and four in 2025. Hence, this global electronic broker is solidly placed to perform well financially.
Even in the first half of 2024, as the equity markets scaled new highs on the back of clarity on several macroeconomic factors, IBKR’s performance was impressive. The company garnered record commission fees as investors took more assertive positions. Also, as of June 30, 2024, its total customer accounts and total customer Daily Average Revenue Trades (DARTs) surged 28%. These majorly supported the company’s total revenues, which jumped 18% year over year.
IBKR witnessed a rise in total customer accounts and total customer DARTs in July and August. This will support top-line growth in the upcoming period. Hence, investors are optimistic about the company’s prospects.
Technical indicators also suggest continued strength for Interactive Brokers. At present, the stock is trading above its 50-day and 200-day moving average, indicating a bullish trend.
50-Day & 200-Day Moving Average
Image Source: Zacks Investment Research
This underscores positive market sentiments and confidence in the company's financial health and prospects.
Analyzing Interactive Brokers’ Investment Potential
IBKR processes trades in stocks, futures, options, cryptocurrencies and forex on more than 150 exchanges across several countries and currencies. Unlike many of its peers, the company has a low level of compensation expense relative to net revenues (12% in the first half of 2024) driven by its technological excellence.
Since its inception, Interactive Brokers has been focused on developing proprietary software to automate broker-dealer functions. This has resulted in a steady growth in revenues as commission per trade continues to improve. Net revenues are expected to rise further, given the solid DART numbers.
Interactive Brokers has been undertaking several measures to enhance its global presence and expand its product suite. In August 2024, the company announced that its wholly-owned subsidiary, the CFTC-regulated ForecastEx LLC, started operating. The company’s clients from eligible countries will be able to trade Forecast Contracts on upcoming economic data releases and climate indicators.
Additionally, the company is making efforts to bolster its market share. By launching new products and services, IBKR intends to strengthen its position in the online brokerage space.
Further, the Zacks Consensus Estimate for IBKR’s 2024 and 2025 earnings implies 18.4% and 2% growth, respectively, year over year. Encouragingly, the company is witnessing northbound estimate revisions for the current and the next year.
Estimate Revision Trend
Image Source: Zacks Investment Research
IBKR’s Attractive Valuation
Despite the recent rally in IBKR shares, it appears inexpensive relative to the industry. The company is currently trading at the 12-month trailing price-to-tangible book (P/TBV) ratio of 0.97, below the industry’s 5.06.
Price-to-Tangible Book Ratio (TTM)
Image Source: Zacks Investment Research
Also, the stock is trading well below its peers, Tradeweb and Schwab. At present, TW and SCHW’s 12-month trailing P/TB TTM ratios are 11.17 and 8, respectively.
So, from a valuation perspective, Interactive Brokers’ shares present a compelling buying opportunity. The stock is still undervalued as the market has yet to fully recognize or price the company’s growth prospect.
Buy IBKR Stock Before It’s Too Late
Interactive Brokers has demonstrated remarkable growth and resilience in the electronic brokerage space, significantly outperforming industry benchmarks and key competitors. The company's proprietary software and strategic expansions have translated into substantial financial gains, marking it as a strong contender in the market.
As the Fed continues to lower interest rates, it will act as a tailwind for IBKR. Hence, given the company’s strong fundamentals, cheap valuation and positive estimate revisions, we believe investors should consider parking their cash in the stock at its current levels for solid long-term returns.
IBKR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.