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How to Play IBKR Stock Post Q3 Earnings and Amid Presidential Poll?
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Shares of Interactive Brokers Group (IBKR - Free Report) have soared 80.5% this year. This impressive rise has significantly outpaced the 28.1% rally of the industry it belongs to and the 22.9% growth of the Zacks S&P 500 composite.
Compared with its peers in the brokerage space, IBKR’s performance is notably stronger. Charles Schwab (SCHW - Free Report) has gained just 3%, while Tradeweb Markets Inc. (TW - Free Report) stock is up 47.9% in the same timeframe.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
On Oct. 15, IBKR announced third-quarter results. Though the quarterly earnings missed the Zacks Consensus Estimate, it grew 13% year over year to $1.75 per share on GAAP revenues of $1.37 billion (up 19%).
Driven by industry-wide global robust options, futures and stock volumes, Interactive Brokers added 196,000 new accounts in the quarter, following closely behind the meme stock craze of the first quarter of 2021. As the equity markets touched new highs on the back of clarity on several macroeconomic factors and the first Federal Reserve interest rate cut in more than four years, the company garnered record commission fees as investors took more assertive positions.
Similarly, net interest income (NII) reached a quarterly record despite interest rate cuts in several countries. “A continued risk-on environment” resulted in a significant jump in margin borrowing and a solid account growth led to increases in the company’s segregated cash portfolio. These drove IBKR’s NII higher, partly offset by the interest paid to its customers on their cash balances.
U.S. Presidential Elections and IBKR
With the U.S. presidential elections on Nov. 5, higher volatility and volume are expected across the stock markets. Further, historically, the S&P 500 Index has posted positive returns 83% of the time during the election year. Hence, this global electronic broker is solidly placed to perform well financially.
Total Returns During Presidential Election Years (1928-2016)
Image Source: Morningstar/Ibbotson Associates
Further, with the addition of the election political contract on its newly launched ForecastEx platform, Interactive Brokers expects to attract new clients.
ForecastEx was launched on Aug. 1. The company’s clients from eligible countries can trade Forecast Contracts on upcoming economic data releases and climate indicators. The election political contract was added on Oct. 4 and since then it has attracted many U.S clients and is witnessing heavy volume.
Hence, Interactive Brokers is set to gain from the U.S. presidential polls.
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 (11.5% in the first nine months 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 steady revenue growth as commission per trade improves. Net revenues are expected to rise further, given the solid DART numbers.
Interactive Brokers has taken several measures to enhance its global presence and expand its product suite. These efforts have bolstered the company's market share. IBKR intends to strengthen its position in the online brokerage space by launching new products and services.
Rising Estimates Instill Confidence in IBKR’s Earnings
Encouragingly, IBKR is witnessing northbound estimate revisions for the current and the next year.
Estimate Revision Trend
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on ZacksEarnings Calendar.
The Zacks Consensus Estimate for IBKR’s 2024 and 2025 earnings implies 19.8% and 2.2% growth, respectively, year over year.
Earnings Estimates
Image Source: Zacks Investment Research
IBKR’s Compelling Valuation
Despite the surge in IBKR’s 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 1.02, below the industry’s 2.49.
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 12.32 and 8.78, respectively.
From a valuation perspective, Interactive Brokers’ shares present an attractive buying opportunity. The stock is still undervalued as the market has yet to fully recognize or price the company’s growth potential.
Momentum to Continue for Interactive Brokers
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.
The recent U.S. presidential election is expected to support IBKR’s top line as volatility increases. Also, as the Federal Reserve and other global central banks continue to lower interest rates, it will be a tailwind for the company.
Hence, given the company’s strong fundamentals, cheap valuation and positive estimate revisions, we believe investors should consider parking their cash in Interactive Broker shares at its current levels for solid long-term returns.
Image: Bigstock
How to Play IBKR Stock Post Q3 Earnings and Amid Presidential Poll?
Shares of Interactive Brokers Group (IBKR - Free Report) have soared 80.5% this year. This impressive rise has significantly outpaced the 28.1% rally of the industry it belongs to and the 22.9% growth of the Zacks S&P 500 composite.
Compared with its peers in the brokerage space, IBKR’s performance is notably stronger. Charles Schwab (SCHW - Free Report) has gained just 3%, while Tradeweb Markets Inc. (TW - Free Report) stock is up 47.9% in the same timeframe.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
On Oct. 15, IBKR announced third-quarter results. Though the quarterly earnings missed the Zacks Consensus Estimate, it grew 13% year over year to $1.75 per share on GAAP revenues of $1.37 billion (up 19%).
Driven by industry-wide global robust options, futures and stock volumes, Interactive Brokers added 196,000 new accounts in the quarter, following closely behind the meme stock craze of the first quarter of 2021. As the equity markets touched new highs on the back of clarity on several macroeconomic factors and the first Federal Reserve interest rate cut in more than four years, the company garnered record commission fees as investors took more assertive positions.
Similarly, net interest income (NII) reached a quarterly record despite interest rate cuts in several countries. “A continued risk-on environment” resulted in a significant jump in margin borrowing and a solid account growth led to increases in the company’s segregated cash portfolio. These drove IBKR’s NII higher, partly offset by the interest paid to its customers on their cash balances.
U.S. Presidential Elections and IBKR
With the U.S. presidential elections on Nov. 5, higher volatility and volume are expected across the stock markets. Further, historically, the S&P 500 Index has posted positive returns 83% of the time during the election year. Hence, this global electronic broker is solidly placed to perform well financially.
Total Returns During Presidential Election Years (1928-2016)
Image Source: Morningstar/Ibbotson Associates
Further, with the addition of the election political contract on its newly launched ForecastEx platform, Interactive Brokers expects to attract new clients.
ForecastEx was launched on Aug. 1. The company’s clients from eligible countries can trade Forecast Contracts on upcoming economic data releases and climate indicators. The election political contract was added on Oct. 4 and since then it has attracted many U.S clients and is witnessing heavy volume.
Hence, Interactive Brokers is set to gain from the U.S. presidential polls.
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 (11.5% in the first nine months 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 steady revenue growth as commission per trade improves. Net revenues are expected to rise further, given the solid DART numbers.
Interactive Brokers has taken several measures to enhance its global presence and expand its product suite. These efforts have bolstered the company's market share. IBKR intends to strengthen its position in the online brokerage space by launching new products and services.
Rising Estimates Instill Confidence in IBKR’s Earnings
Encouragingly, IBKR is witnessing northbound estimate revisions for the current and the next year.
Estimate Revision Trend
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
The Zacks Consensus Estimate for IBKR’s 2024 and 2025 earnings implies 19.8% and 2.2% growth, respectively, year over year.
Earnings Estimates
Image Source: Zacks Investment Research
IBKR’s Compelling Valuation
Despite the surge in IBKR’s 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 1.02, below the industry’s 2.49.
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 12.32 and 8.78, respectively.
From a valuation perspective, Interactive Brokers’ shares present an attractive buying opportunity. The stock is still undervalued as the market has yet to fully recognize or price the company’s growth potential.
Momentum to Continue for Interactive Brokers
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.
The recent U.S. presidential election is expected to support IBKR’s top line as volatility increases. Also, as the Federal Reserve and other global central banks continue to lower interest rates, it will be a tailwind for the company.
Hence, given the company’s strong fundamentals, cheap valuation and positive estimate revisions, we believe investors should consider parking their cash in Interactive Broker shares 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.