J.P. Morgan analyst Katherine Lei upgraded Futu Holdings ( NASDAQ: FUTU ) Thursday to Overweight from Neutral after the Chinese fintech posted strong Q2 earnings and the risk of de-listing eased after U.S. and China signed an agreement on audits of China ADR stocks.
Furthermore, J.P. Morgan's China internet analyst Alex Yao expects China internet stocks to deliver Q3 earnings beats.
Futu's ( FUTU ) better-than-expected Q2 results were fueled by stable client growth, market share gains, and a higher blended commission rate, Lei wrote in a note to clients.
"Key positives include steady paying client growth despite a volatile market, sequential rebound in clients assets, market share gain in both HK and the U.S., decent growth in margin finance volume and increase in the blended commission rate (+0.4 bps Q/Q or +1.6 bps Y/Y0 on the back of higher derivatives in total trading volume," she said.
Management guidance was mixed, the analyst wrote, pointing to incremental revenue of HK$200M-250M in H2 from its U.S. clearing house and another HK$200M-250M in interest income due to Fed rate hikes. But on the negative side, the company maintained full-year paying clients guidance at 200K and indicated client acquisition costs would be ~HK$3,500 in H2 2022 compared with previous guidance of HK$2,500-3,000.
Even with the upgrade, Futu ( FUTU ) stock has slipped 1.1% in Thursday premarket trading.
Lei's Overweight rating is more bullish than the Quant rating of Hold and aligns with the average Wall Street rating of Buy .
Previously (Aug. 30), Futu Holdings ( FUTU ) rises after higher Q2 earnings
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Futu upgraded to Overweight at J.P. Morgan on strong Q2, lower de-listing risk