Interactive Brokers Group, Inc. (IBKR): A Bull Case Theory

We came across a bullish thesis on Interactive Brokers Group, Inc. (IBKR) on Chit Chat Stocks’ Substack. In this article, we will summarize the bulls’ thesis on IBKR. Interactive Brokers Group, Inc. (IBKR)'s share was trading at $210.81 as of 28^th May. IBKR’s trailing and forward P/E were 29.04 and 28.09 respectively according to Yahoo Finance.

Interactive Brokers (IBKR), founded by Thomas Peterffy, has a long history of innovation rooted in automation and technology, dating back to his arrival in the U.S. in 1965. As a computer programmer, Peterffy pioneered computerized options pricing and founded Timber Hill, an automated market maker, which eventually led to the creation of IBKR in 1993 to offer these advanced execution systems to clients. Over the years, IBKR expanded globally, providing customers access to a wide range of international markets and asset classes, which remains a core strength today.

In 2017, IBKR divested Timber Hill to focus on its brokerage business and in 2019 launched IBKR Lite, offering commission-free trades to individual investors, while IBKR Pro caters to professional traders with low commissions and advanced features like SmartRouting and cheap margin loans. The company’s culture, deeply influenced by its tech-driven founder, emphasizes long-term focus, internal promotions, and retaining talent, creating a competitive advantage that is hard for legacy brokers to replicate.

Despite Peterffy’s advanced age, IBKR’s management continuity and culture give investors confidence in its future. With only 3.6 million accounts compared to competitors like Robinhood and Schwab, IBKR has significant room for growth, especially internationally, where its platform allows investors to access U.S. markets easily. Financially, IBKR boasts impressive profitability with a 72% pre-tax margin and a conservative balance sheet, enabling it to navigate interest rate cycles better than peers. If account growth continues at 15% annually, operating income could reach $15.6 billion in a decade. The stock, currently around $154, offers strong long-term potential with disciplined spending, expanding competitive moats, and superior product offerings.

Previously, we have covered Interactive Brokers Group, Inc. (IBKR) in October 2024 wherein we summarized a bullish thesis by Long-term Investing on Substack. The author highlighted IBKR’s strong financials, technological edge, and steady account growth, positioning it well for future expansion. It also noted growth potential from the expanding brokerage market and founder-led stability. Since our last coverage, the stock is up 35% as of 28^th May.

Interactive Brokers Group, Inc. (IBKR) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held IBKR at the end of the first quarter which was 69 in the previous quarter. While we acknowledge the risk and potential of IBKR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IBKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.