Bank of America is recommending investors to buy shares of Interactive Brokers, stating that now is the right time to do so. The global electronic brokerage firm recently reported earnings that surpassed analyst estimates. The bank has given Interactive Brokers a buy rating and set a price target of $128, suggesting a potential increase of around 54% from the current closing price.
According to analyst Craig Siegenthaler, Interactive Brokers has strong growth prospects due to its broad range of offerings for active traders, retail, brokers, financial advisors, hedge funds, and prop traders worldwide. Siegenthaler believes that the company’s key competitive advantage lies in its technology research and development efforts, which provide it with new capabilities, lower product price points, and an operating margin of over 70%.
Siegenthaler also highlighted that Interactive Brokers is trading at a discounted valuation compared to other e-trading platforms, despite its strong growth potential and diversified profit stream. The stock is currently trading at 11 times the bank’s 2025 earnings-per-share estimate and has a 24% upside potential based on consensus EPS for 2025.
The analyst expects Interactive Brokers to continue generating strong organic growth, as it has achieved an average growth rate of 34% from 2017 to 2022. He also believes that the company’s recent adjustment to its account growth target presents an opportunity for Interactive Brokers to surpass expectations in terms of account inflows.
However, Siegenthaler acknowledged that Interactive Brokers can be a challenging investment for long-term investors due to factors such as its large market capitalization, limited stock liquidity, and uncertainties regarding its succession plan and capital retention. Nevertheless, he believes that an improvement in these factors, coupled with a bullish market or increased hedge fund interest, could significantly enhance the stock’s valuation potential.
In its recent earnings report, Interactive Brokers announced adjusted earnings of $1.55 per share and adjusted revenue of $1.14 billion for the third quarter. These figures surpassed analysts’ expectations of $1.51 per share and $1.11 billion in revenue.
With Bank of America’s endorsement and the positive earnings performance, it will be interesting to see how Interactive Brokers performs in the coming months and if it can indeed reach the projected 54% increase in share price.