Bullish (but reachable) targets

Swissquote released its FY2020 numbers. The key numbers were, however, already known (preliminary release on 14 January 2021). The key takeaways were related to the short and mid-term guidances. These are indeed very bullish with 15% growth in revenues expected in 2021 together with a 23% pre-tax profit margin and CHF500m revenues expected in 2024 (vs CHF320m in 2020) and a CHF200m pre-tax profit (vs CHF100m in 2020). We will adjust our numbers accordingly with a sharp rise expected in the target price.

Swissquote has reached its 2022 targets two years in advance and the new guidance was therefore highly anticipated. 2020 was a year all kinds of possible tailwinds for Swissquote. The COVID-19 pandemic led indeed to a sharp rise in volatility, leading to a high degree of volumes (especially from the retail investors). At the same time, crypto-currencies are becoming mainstream with Swissquote at the forefront of the crypto-trading.
Management is therefore very confident that 2020 was a game-changer for Swissquote rather than an exceptional year.

Guidances for both 2021 and 2024 are indeed very bullish and (well) above our expectations. These are greatly detailed and at the same time offer a lot of visibility up to 2024.

Management is expecting revenues to increase by 15% in 2021 vs 2020 (CHF365m expected). Pre-tax profit is expected to increase by 23% (to CHF130m) for 2021, with crypto-trading helping. Revenues from the crypto business were CHF16m in 2020 and management is expecting revenues to increase to CHF35m in 2021. At the same, this is ever more profitable as the costs of managing this asset class are very low (pre-tax margin on these revenues are at 80% vs about 35-0% for other asset classes). The interest of institutional investors makes management’s guidance regarding the crypto-currencies’ revenue expectations credible and sustainable.

Net new money and the opening of new accounts remain buoyant with +CHF1.4bn of new money ytd (implicit guidance was CHF3bn per year…) and about 45,000 new accounts ytd (vs 10,000 last year).
Swissquote is therefore expecting more like CHF5bn net new money per year (vs CHF3bn previously) with half from Switzerland and other half from its international network (Swissquote Bank Europe or former InternaxX, Singapore and the Middle East). This is the main scenario leading to the 2024 guidance regarding revenues. The CHF500m revenues expected for 2024 are roughly equal to a 90bp margin on assets of CHF55bn.

Swissquote’s guidance might be bullish, especially in the light of the deflation that online brokers are facing in the US but also in Europe (IG Group or Saxo Bank in Switzerland for instance). Swissquote’s offer is, however, quite different as it gives investors a very deep offering in terms of trading.

At the same time, the Gamestop/Robinhood debacle showed that commissions-free trading has a liquidity price…that should (and will) benefit Swissquote. We will revise our (conservative) expectations sharply upwards.

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