On August 21, JPMorgan released a research report maintaining an "overweight" rating on Futu Holdings and slightly lowering the target price from $90 to $88. JPMorgan pointed out the following highlights:

2Q results were a beat: Revenues grew by 26% y/y (or 21% q/q) on the back of the sequential improvement in turnover, increase in margin financing balance. Management revised up the full-year client guidance from 400k to 550k as client growth remained solid in 2Q (155k), and net asset inflow also edged up from ~HK$35bn in 1Q to over HK$40bn in 2Q.

Development of new business initiatives on track: Management disclosed that client AUM continued to improve and trading velocity remained high in the Japan and Malaysia markets as Futu continued to roll-out new products and services in the two markets. Futu launched crypto trading services in Hong  Kong SAR and Singapore in August, and is in the process to contribute its R&D capability to Airstar Bank after it acquired a 44% share of Airstar Bank in June.

Estimate and PT changes: JPM has revised estimates to reflect stronger paying client growth, and the increase in trading turnover. As a result, 2024- 26E revenues estimates are revised up by 1%/1%/1%, while 2024-26E earnings estimates have been trimmed by 3%/3%/2% due to the increase in S&M expense amid stronger client growth. They arrive at a new Dec-24 PT of US$88, and maintain their OW rating on Futu.

Downside risks include:

weakness in China tech stocks, leading to lackluster trading volume growth;

regulatory risk;

lower-than-expected growth in the number of paying clients.

Upside risks include:

higher-than-expected growth in paying client numbers;

stronger than-expected trading volume growth;

better-than-expected operating efficiency improvement;

Futu launched crypto business in Aug-24, which could bring upside to clients and AUM growth.