Futu Holdings Gains 59% in a Year: Should Investors Ride the Rally?

Futu Holdings Limited FUTU shares have soared 59.3% in a year, outperforming the 12.6% rise of its industry and 8.1% growth in the Zacks S&P 500 Composite.

FUTU has outperformed its industry peers, Amplitude, Inc. AMPL and Alithya Group Inc. ALYAF. AMPL and ALYAF shares have declined 11.3% and 20.7% in a year.

One-Year Price Performance

Futu Holdings has also outperformed its industry, Amplitude and Alithya Group in the past six months. FUTU shares have risen 6% in the same period, while the industry and Amplitude have declined 17.3% and 19.4%, respectively. Meanwhile, shares of Alithya Group have gained 4.7%.

In the last trading session, the FUTU stock closed at $ 85.30, down 54.4% from its 52-week high of $ 130.90.

We analyze Futu Holdings’ stock rally and recommend whether it is a good bargain for investors to buy the stock or stay away from the rally.

Customer-Base Expansion Drives FUTU’s Top Line

In the fourth quarter of 2024, the number of paying clients increased 39.1% from the year-ago quarter, resulting in a year-over-year increase of 41% in 2024. The rise can be attributed to exponential client acquisition across all markets, with Hong Kong being the top contributor of new paying clients. FUTU witnessed continued client growth and improved client quality in Singapore. Japan did not disappoint, as there was a double-digit sequential growth in new paying clients.

The number of registered clients and the total number of users increased 28.7% and 16.2% year over year in the fourth quarter of 2024, respectively. A growing customer base translated to Futu Holdings’ revenues surging 86.8% year over year in the fourth quarter of 2024. This resulted in 35.8% year-over-year growth in 2024. The company expects 800,000 new paying clients in 2025, compelling us to anticipate the increment in the top line to sustain in the long run.

AI Incorporation Boosts Futu Holdings’ Operational Efficiency

FUTU’s local departments deployed DeepSeek, which increased operational efficiency as the firm utilized AI capabilities for internal operations. The benefits of incorporating AI are reflected in the company’s fourth-quarter 2024 results, as the operating income and operating margin increased 116.6% and 690 basis points year over year, respectively, in the quarter.

The company’s marketing efforts should improve on the back of AI-generated advertisements, designs, graphics, and more. This should potentially reduce marketing expenses, boosting the bottom line.

Futu Holdings Stock Looks Cheap

FUTU shares look cheap and appealing to investors. The stock is priced at 11.72 times forward 12-month earnings per share, which is lower than the industry’s average of 27.06 times.

When looking at the trailing 12-month EV-to-EBITDA ratio, FUTU is trading at 2.48 times, way below the industry’s average of 19.54 times.

FUTU’s Healthy Capital Returns

Return on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. Futu Holdings’ trailing 12-month ROE is 20%, outperforming the industry’s average of 6.4%.

Futu Holdings’ Strong Top & Bottom-Line Prospects

The Zacks Consensus Estimate for the company’s 2025 revenues is $2.1 billion, implying 22.8% year-over-year growth. The consensus estimate for FUTU’s 2025 earnings per share stands at $6.92, suggesting a 38.1% year-over-year increase.

Buy FUTU Now

Futu Holdings serves as a compelling investment opportunity. Although there has been a substantial surge in its price, a discounted valuation signals room for growth. The company is not shy of utilizing AI, thereby boosting its operational efficiency. FUTU has experienced a massive client inflow across all markets and expects to gain further. This, when coupled with robust capital returns and strong top and bottom-line prospects, makes the FUTU stock a must-buy for investors now.

FUTU flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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