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Interactive Brokers (IBKR) Stock Up 42% YTD: Too Late to Buy?
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Shares of Interactive Brokers Group (IBKR - Free Report) have surged 41.8% this year. This impressive rise has significantly outpaced the 8.8% rally of the industry it belongs to and the 12.2% growth of the Zacks S&P 500 composite.
When compared with its peers in the brokerage space, IBKR’s performance is notably stronger. Charles Schwab (SCHW - Free Report) has lost 9.2% and LPL Financial (LPLA - Free Report) stock is down 12.4% in the same timeframe.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
The year has been a good one for this global electronic broker as equity markets touched new highs. The clarity on several macroeconomic factors led the clients to become more comfortable with taking on risks. Hence, as the clients took more assertive positions, it helped IBKR garner record commission fees during the first half of 2024.
Growth in net interest income and net interest margin was driven by the strength in margin loans (which touched $55 billion in the second quarter of 2024) and segregated cash interest. This was offset to some extent by higher interest expense on customer cash balance. The first half of the year recorded an 18% jump in total revenues (GAAP basis).
Also, at present, Interactive Brokers stock is trading above its 200-day moving average, indicating a bullish trend. This underscores positive market sentiments and confidence in the company's financial health and prospects.
200-Day Moving Average
Image Source: Zacks Investment Research
Given the continuous strength of IBKR shares, many investors are tempted to buy the stock. But is now the correct time to buy the stock, or should investors wait for a better entry point?
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 (12% in the first half of 2024), primarily 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 a steady growth in revenues as commission per trade continues to improve. Net revenues are expected to rise further, given the solid DART numbers. In July, total client DARTs were 2,756,000, which increased 38.4% from July 2023 and 11.6% from last month.
Interactive Brokers has been taking several measures to enhance its global presence and expand its product suite. Earlier this month, the company announced that its wholly-owned subsidiary, the CFTC-regulated ForecastEx LLC, has started operating. The company’s clients from eligible countries will be able to trade Forecast Contracts on upcoming economic data releases and climate indicators.
Additionally, the company is making efforts to bolster its market share. By launching new products and services, IBKR intends to strengthen its position in the online brokerage space.
Is the IBKR Stock a Buy Now?
Despite the recent rally in IBKR 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 0.84, below the industry’s 4.72.
Price-to-Tangible Book Ratio (TTM)
Image Source: Zacks Investment Research
Also, the stock is trading well below its peers, Tradeweb Markets Inc. (TW - Free Report) and Schwab. At present, TW and SCHW’s 12-month trailing P/TB TTM ratios are 10.63 and 7.74, respectively.
Hence, 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 prospects.
Further, the Zacks Consensus Estimate for IBKR’s 2024 and 2025 earnings implies 18.4% and 2% growth, respectively, year over year. Encouragingly, the company is also witnessing northbound estimate revisions for the current and the next year.
Estimate Revision Trend
Image Source: Zacks Investment Research
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.
Hence, given the company’s strong fundamentals, cheap valuation and positive estimate revisions, we believe investors should consider parking their cash in Interactive Brokers at its current price levels for solid long-term returns.
Image: Bigstock
Interactive Brokers (IBKR) Stock Up 42% YTD: Too Late to Buy?
Shares of Interactive Brokers Group (IBKR - Free Report) have surged 41.8% this year. This impressive rise has significantly outpaced the 8.8% rally of the industry it belongs to and the 12.2% growth of the Zacks S&P 500 composite.
When compared with its peers in the brokerage space, IBKR’s performance is notably stronger. Charles Schwab (SCHW - Free Report) has lost 9.2% and LPL Financial (LPLA - Free Report) stock is down 12.4% in the same timeframe.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
The year has been a good one for this global electronic broker as equity markets touched new highs. The clarity on several macroeconomic factors led the clients to become more comfortable with taking on risks. Hence, as the clients took more assertive positions, it helped IBKR garner record commission fees during the first half of 2024.
Growth in net interest income and net interest margin was driven by the strength in margin loans (which touched $55 billion in the second quarter of 2024) and segregated cash interest. This was offset to some extent by higher interest expense on customer cash balance. The first half of the year recorded an 18% jump in total revenues (GAAP basis).
Also, at present, Interactive Brokers stock is trading above its 200-day moving average, indicating a bullish trend. This underscores positive market sentiments and confidence in the company's financial health and prospects.
200-Day Moving Average
Image Source: Zacks Investment Research
Given the continuous strength of IBKR shares, many investors are tempted to buy the stock. But is now the correct time to buy the stock, or should investors wait for a better entry point?
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 (12% in the first half of 2024), primarily 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 a steady growth in revenues as commission per trade continues to improve. Net revenues are expected to rise further, given the solid DART numbers. In July, total client DARTs were 2,756,000, which increased 38.4% from July 2023 and 11.6% from last month.
Interactive Brokers has been taking several measures to enhance its global presence and expand its product suite. Earlier this month, the company announced that its wholly-owned subsidiary, the CFTC-regulated ForecastEx LLC, has started operating. The company’s clients from eligible countries will be able to trade Forecast Contracts on upcoming economic data releases and climate indicators.
Additionally, the company is making efforts to bolster its market share. By launching new products and services, IBKR intends to strengthen its position in the online brokerage space.
Is the IBKR Stock a Buy Now?
Despite the recent rally in IBKR 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 0.84, below the industry’s 4.72.
Price-to-Tangible Book Ratio (TTM)
Image Source: Zacks Investment Research
Also, the stock is trading well below its peers, Tradeweb Markets Inc. (TW - Free Report) and Schwab. At present, TW and SCHW’s 12-month trailing P/TB TTM ratios are 10.63 and 7.74, respectively.
Hence, 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 prospects.
Further, the Zacks Consensus Estimate for IBKR’s 2024 and 2025 earnings implies 18.4% and 2% growth, respectively, year over year. Encouragingly, the company is also witnessing northbound estimate revisions for the current and the next year.
Estimate Revision Trend
Image Source: Zacks Investment Research
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.
Hence, given the company’s strong fundamentals, cheap valuation and positive estimate revisions, we believe investors should consider parking their cash in Interactive Brokers at its current price levels for solid long-term returns.
IBKR currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.