Small neo-brokers suffer in the crisis year 2022. But the big ones suddenly gain market share. Europe’s largest online broker even reports brilliant figures in the midst of the stock market crisis. The stock looks undervalued and is a hot candidate for a comeback.
Fintechs are not doing badly at the moment, they are even miserable. Whether in the payment sector (Sumup), in the financing industry (Klarna), at neo-banks (Konntest or Nuri) or at neo-brokers (from Trade Republic to Bitpanda) – “consolidation measures” are being taken everywhere, crisis strategies are being developed, employees are being laid off . Above all, those that seem cool but are not yet turning a profit are coming under increasing pressure. It is no longer so easy to get fresh money – and investors are becoming more critical.
But the big neo-brokers all over Europe have also had to lose their feathers. Norden and Hargreaves Lansdown shares have lost a third of their value since the start of the year, while Avanza and FlatexDegiro have lost around half. But the two giants in the industry are now preparing to make a comeback. Both stocks have again been in high demand for the past two weeks. The reason is as simple as it is astonishing – both are doing much better than feared. The new figures encourage investors.
It is clear that the weakening of the stock market in 2022 means that the smaller, unprofitable neo-brokers with their young, small and tiny clientele will be pushed out of the top dogs. FlatexDegiro in particular is currently gaining massive market share. Flatex reports 282,000 new customer accounts in the middle of the disaster half of 2022. By the end of June 2022, the number of customer accounts had increased to 2.29 million, and 500,000 to 600,000 new accounts are expected for the year as a whole. In the first half of the year, the group even reported a strong increase in the interim operating result (EBITDA) by 67.5 percent to 89.1 million euros (after 53.2 million euros in the first half of 2021). The EBITDA margin increased to 42.5 percent (H1 2021: 23.5 percent). Operating cash flow was around 70 million euros in the first half of 2022.
It sounds surprisingly good, especially as the company expands throughout Europe. On the stock exchange, however, investors are wondering whether the positive business development can really justify higher prices. Because neon brokers’ stock market valuations ran pretty hot last year. Even now, the stock market is still paying an average price-to-earnings (P/E) of 28 for the large Neobroker stocks based on expected earnings in 2022. But on closer inspection, FlatexDegiro stock in particular appears to be clearly undervalued. Because their P/E ratio is only 12.1. That gives a discount in the stock valuation of 57 percent to the peer group. If you look more closely at the company’s valuation (enterprise value) in relation to earnings, the EV/Ebitda ratio for the industry currently shows a value of 15.9. FlatexDegiro is only rated at 6.1, so the discount is a whopping 62 percent. In plain language: Flatex stock is currently very cheap.
In general, the lowest possible EV to EBITDA is desirable. The lower the ratio, the higher the profit in relation to the current company price and the more worth buying a company seems. A low price with a high profit thus implies a buying opportunity. This ratio is therefore more meaningful than the pure P/E ratio, because borrowed capital is also taken into account here.
The undervaluation of Flatex stock is making analysts sit up and take notice who are looking for real bargains. The investment bank Goldman Sachs recommends buying the share and predicts prices of 20 euros. The analysts from other financial institutions point in particular to the fact that, on the one hand, FlatexDegiro is growing rapidly and throughout Europe, and on the other hand, the average turnover per , which means a plus of 24.4 per cent.
In fact, the Flatex price has already recovered significantly from its July 5 low. At the time, the title cost only 8.55 euros. Today you have to pay around 10 euros again. If Goldman were right, the EUR 20 price target would still be a doubling. A year ago, the price even peaked at more than 28 euros.