The market has a pattern of mispricing diversified businesses as single-line businesses when one line gets too much attention. It happened to Amazon when AWS was buried inside retail. It happened to Microsoft when cloud was buried inside Office. Today it is happening to a US retail brokerage that fell nearly 50% from its highs because one of its seven revenue lines disappointed.
This financial services platform serves 27.4 million funded customers with over $307 billion in platform assets. Last quarter it grew revenue 15% year-on-year, expanded its premium subscriber count by 36% to a record 4.3 million, and grew net deposits by $18 billion at a 22% annualised rate. It also missed top and bottom line estimates because cryptocurrency revenue collapsed 47% year-on-year.
The stock fell 13% on the print. It has stabilised around $80.70, roughly 47% below the 52-week high of $153.86.
Is this a broken growth story or a potential gem? I think it is the latter. 22 out of 30 analysts agree, with a consensus target of $100.29 implying 24% upside, and the high estimate at $155 implying ~100%.
The information or opinions provided are personal views and do not constitute investment advice, a recommendation, an offer, or solicitation to subscribe for, purchase, or sell the investment product(s) mentioned herein.
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