Despite the unstable global environment, there is positive momentum ahead
OPINION CHANGE
CHANGE IN OPINION
Buy vs. Add
We raise our recommendation to Buy following the FY 21 release and the integration of the firms ambitions. In fact, 2021 was a strong year for Swissquote in terms of profitability and top-line, but 2022 is expected deliver the same absolute performance.
In fact, despite the fact that 2022 could be quite grey due to the current global environment, and fears of recession, Swissquote believes it is well-equipped to deal with this challenging environment.
We expect the firm to increase its customer base consistently, offsetting the potential decrease in trading activity per customer, while we also consider that Swissquotes customer profile (average trade of c.20,000) should not be the most impacted by a global/ European recession.
Swissquote is also diversifying its product offering with additional assets such as cryptos or crypto staking. The latter being a potential strong hedge against the financial markets turmoil and increasing reliance on asset-based revenues.
Swissquote is fueled by a stronger balance sheet and an improving rates environment.
CHANGE IN TARGET PRICE
CHF 231 vs. 213 +8.60%
Our target price increases as we update our model with the FY 21 figures and integrate managements updated ambitions. The increase is mainly driven by a DCF improvement, the NAV restatement and the P/Book valuation improvement, on the back of shareholders equity materially growing.
CHANGE IN EPPS
2022 – CHF 13.1 vs. 12.9 +1.49%
2023: CHF 16.0, vs 13.7 +16.8%
EPS grow materially as we integrate the firms ambitions in our forecasts. We expect EPS 2022 to be flat compared to 2021. However, we expect a material improvement for 2023 due to strong top-line growth, strong net new funds flows, increased trading of cryptocurrency assets, and an improving rates environment, all wrapped in an easing of global tensions.
CHANGE IN DCF
CHF 288 vs. 228, +26.4%
In accordance with the EPS, our DCF valuation increases materially as we consider the firms ambitions for its top-line growth and pre-tax margin. These are possible because of a more favorable environment and a structurally diverse company. Pre-tax profit margins should be stable at around 47% in 2023 and 2024, according to our estimates.