Wall Street Cuts Virtu Financial's Outlook: How to Play the Stock?

Virtu Financial, Inc. VIRT, a prominent name in the financial services space, is under scrutiny as analysts trim their earnings projections for 2025 and 2026. While the company extended its streak of earnings beat in the first quarter, sentiment has weakened due to downward revisions in forward estimates.

The Zacks Consensus Estimate for Virtu Financial’s 2025 and 2026 adjusted earnings now stands at $3.97 and $3.83 per share, respectively, reflecting week-over-week declines of 0.5% and 1%. Though 2025 estimates still imply 11.8% year-over-year growth, the forecast for 2026 points to a 3.4% decline. Despite a solid earnings track record, including four consecutive quarterly beats averaging a 20.2% surprise, the stock faces growing headwinds.

Virtu Financial, Inc. Price and EPS Surprise

Virtu Financial, Inc. price-eps-surprise | Virtu Financial, Inc. Quote

The Zacks Consensus Estimate for Virtu Financial’s 2025 and 2026 adjusted net trading income is pegged at $1.68 billion and $1.67 billion, respectively. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Before digging deeper, let’s take a quick look at Virtu’s latest earnings report.

Key Takeaways from VIRT’s 1Q25 Results

Virtu Financial witnessed a strong first quarter, with adjusted earnings per share (EPS) of $1.30 beating the Zacks Consensus Estimate by 9.2% and marking a 71.1% jump year over year. The upside was driven by higher commissions and growth in technology services revenues, along with improved performance across both the Market Making and Execution Services segments amid elevated trading activity.

Interest and dividend income rose 2.9% to $109.1 million, while adjusted EBITDA climbed 57.7% year over year to $319.9 million. However, expenses remained a pressure point. Total operating expenses surged 22.1% to $614.1 million, exceeding expectations of $555.6 million.

VIRT’s Price Action & Valuation

Virtu Financial’s stock has rallied 18.1% year to date, outperforming the broader industry’s 2.4% decline. In comparison, peers like Tradeweb Markets Inc. TW is up 11.1% and CME Group Inc. CME has gained 19.7%. The S&P 500, by contrast, is up just 0.6% YTD.

YTD Price Performance – VIRT, TW, CME, Industry & S&P 500

At current price levels, Virtu Financial now appears overvalued. Its forward P/E ratio stands at 12.60X, above its five-year median of 8.99X and slightly higher than the peer group average of 12.13X. For context, Tradeweb trades at a lofty 40.77X and CME Group at 24.61X. While Virtu Financial’s valuation is nowhere near those levels, its premium to its historical average suggests limited upside in the near term.

Virtu Financial’s Growth Catalysts

Virtu Financial’s Execution Services segment continues to benefit from the ITG acquisition, which has expanded its client base and enhanced revenue diversity. The firm is leveraging its technology stack, including POSIT Alert, Triton Valor EMS and proprietary execution algorithms, for global equity trading.

The company’s balance sheet remains a relative bright spot. Efforts to reduce leverage have paid off, with total debt declining from $1.9 billion in 2019 to $1.7 billion as of March 31, 2025. Cash and equivalents totaled $723.7 million, with just $112.1 million in short-term borrowings. Its debt-to-capital of 54.3% sits below the industry average of 55.5%.

Shareholder returns are another plus. Virtu Financial offers a dividend yield of 2.3%, higher than the industry average of 1.7%, and remains committed to its quarterly dividend of 24 cents per share. In first-quarter 2025, the company repurchased $48.1 million in shares, with $373.8 million still authorized for future buybacks as of April 17, 2025.

Virtu Financial’s Risks

Although adjusted net trading income from the Market Making segment increased in 2024 and the first quarter of 2025, as the market is resuming normalcy, it is likely to witness poor volume growth. The segment’s brokerage, exchange, clearance fees and payments for order flow expenses escalated 67.7% year over year in the first quarter of 2025. 

Free cash flow is also showing signs of stress. After falling 42.3% to $642 million in 2022 and another 35.3% to $416 million in 2023, the metric briefly improved in 2024 but turned negative again in first-quarter 2025. As market volatility subsides, Virtu Financial’s performance may weaken due to declining liquidity demand and fewer trading opportunities.

Adding to investor caution, the average Wall Street price target of $40 implies a potential 3.5% downside from current levels.

Final Verdict: Hold Virtu Financial Stock Now

Virtu Financial has proven its resilience through its strong earnings beat streak and well-managed balance sheet. However, declining forward estimates, high-cost pressures and falling free cash flow raise concerns. With the stock already trading above historical valuation norms and the market environment turning less favorable, investors may want to be cautious.

With a Zacks Rank #3 (Hold), Virtu Financial appears fairly valued for now. It may not offer significant upside in the near term, but it remains a stable pick for investors seeking exposure to the financial services space with a moderate risk profile. Those looking for strong growth or deep value opportunities, however, may want to wait for a better entry point.

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

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

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