Hong Kong Financial Firm Futu Surges 33.12% Amid Stimulus Hints

Key Points

• Futu shares gained 7.81% in June, followed by a 33.12% surge in July.
• It's a fairly young stock, having made its Nasdaq debut in March 2019.
• Futu has exceeded earnings expectations in the past six quarters.
• Earnings and revenue growth accelerated in recent quarters. 

It’s often the case that smaller, arcane stocks can be among the winners in a portfolio. Hong Kong-based Futu Holdings Limited NASDAQ: FUTU is a financial technology company providing online brokerage and wealth management services to global investors and traders. 

Futu is a mid-cap, with a market capitalization of $7.97 billion. The Futu chart shows bullish price action in the past two months, with a gain of 7.81% in June, which was just a warmup to July’s month-to-date increase of 33.12%. 

MarketBeat’s Futu institutional ownership data shows a number of big buyers adding shares recently; that buying has also been showing up on the chart in recent weeks, which you can easily track. 

Shares were already in rally mode, but Futu stock advanced 6.31% on July 24 in volume 52% heavier than normal. Those gains came as the Chinese government hinted at stimulus measures to boost the economy, after months of disappointing growth. 

Futu’s recent price gains are as follows:

• 1 month: 31.47%
• 3 months: 19.40%
• Year-to-date: 26.10%

Platform Aimed At U.S. Customers

Futu operates two proprietary digital platforms, Futubull and Moomoo, with the latter headquartered in Palo Alto, California, and aimed at U.S. users. 

Other services include trade execution and clearing, margin financing and securities lending. The company has also embedded social media tools within its platforms to create a network of users, and for professional communications purposes. Futu also provides corporate services, including IPO distribution, investor relations, and facilitating employee stock option (ESOP) purchases.

The stock is relatively new, having made its Nasdaq debut in March 2019. 

Trending Higher Since May Earnings Report

Like many other stocks in both the tech and financial spaces, Futu suffered through 2022. It’s had some abbreviated rally attempts, but has been on an uptrend since its most recent earnings report in late May. 

In the quarter, the company earned $1.10 a share on revenue of $318.5 million. Those marked year-over-year increases of 114% and 52%, respectively. 

Highlights from the quarter included:

• The total number of paying clients increased 15.2% year-over-year to 1.528 million.
• Total client assets increased 20.6% year-over-year to around $59.66 billion.
• The company had 353 IPO distribution and investor relation clients, as well as 662 ESOP clients as of quarter end, up 37% and 44% year-over-year, respectively. 
• The company acted as joint lead managers for several high-profile Hong Kong-listed IPOs.

MarketBeat’s Futu earnings data show the company beat bottom-line views by 17 cents a share. It’s exceeded earnings expectations in each of the past six quarters. 

Price growth accelerated in late June after the stock began rebounding from a short pullback.

Watch For Moving-Average Crossover

There’s a very timely reason to keep this stock on a watch list: The 200-day moving average is currently above the 50-day line. Watch for the 50-day average to cross above the 200-day, which is a potentially bullish indicator, signaling strong upside momentum. 

That’s a potential entry point, as is the price level of $54.10, which it’s close to surpassing. 

Other U.S.-listed Chinese brokerages include AGM Group Holdings Inc. NASDAQ: AGMH and UP Fintech Holding Limited NASDAQ: TIGR 

Futu is outperforming both those companies on a price-appreciation basis, and its earnings and revenue growth have been stellar. 

Year-over-year earnings and revenue accelerated in the past four quarters, and Wall Street expects earnings to increase by 43% this year, to $3.83 per share. The company has been profitable each year since 2018, with earnings increases each year.

Its three-year earnings growth rate is 87%, and its revenue growth rate during that time is 75%.  

Big Investment Banks Covering Stock

As you might expect from a small-ish non-U.S. stock, analysts aren’t exactly swarming all over this stock, but it’s managed to attract attention from some heavy hitters, indicating growth potential.

MarketBeat’s Futu analyst ratings show only seven analysts following the stock, but they include Bank of America, Morgan Stanley, JPMorgan Chase and Citigroup. The big investment banks tend to have analysts following a stock if they believe the company could be a client in the future. That’s not the case with every company.

Analysts’ consensus rating on the stock is “hold.”