Re-evaluating Futu

Futu is at a turning point for valuation reconstruction.

According to news from the Chasing Wind Trading Desk, JP Morgan analysts Katherine Lei, Peter Zhang, and others recently released a research report stating that Futu's strong customer base, asset management scale, revenue, and profit growth prospects have not been fully reflected in its valuation reassessment, while the easing of regulatory clouds and the development of digital asset businesses are expected to drive a narrowing of valuation discounts.

The report emphasizes that since 2024, Futu has achieved significant growth in customer acquisition, asset management scale, revenue, and profit, with customer asset management scale increasing by approximately 60% year-on-year, but its valuation multiple reassessment has lagged significantly. Currently, Futu's expected price-to-earnings ratio for 2026 is 20 times, well below the historical average of 23 times.

Based on this judgment, Goldman Sachs has significantly raised Futu Holdings' target price from $200 to $270, an increase of 35%, corresponding to a 28 times expected price-to-earnings ratio for 2026, and maintains an overweight rating.

Growth and Valuation "Decoupling"

JP Morgan believes that there is a clear "decoupling" between Futu's growth prospects and its price-to-earnings ratio, which is the core driving force for valuation reassessment.

Historically, there has been a strong correlation between the two. From 2019 to 2021, when Futu's customer asset management scale had a compound annual growth rate (CAGR) of about 100%, its expected price-to-earnings ratio averaged 35 times, with a peak reaching 93 times.

However, after regulatory tightening in the fourth quarter of 2021 restricted the addition of new mainland customers, the company's growth prospects sharply declined.

During the period from 2022 to 2023, Futu's customer asset management scale CAGR fell to only 9%, and the average expected price-to-earnings ratio was subsequently adjusted down to 14 times.

The report points out that since 2024, Futu's customer acquisition and asset management scale have significantly accelerated, with a year-on-year growth of approximately 60%, but its expected price-to-earnings ratio average remains at 14 times.

JP Morgan expects that under the forecast of a 43% year-on-year growth in customer asset management scale in 2025, the current price-to-earnings ratios of 23 times and 20 times based on 2025 and 2026 earnings forecasts are due for reassessment.

Overseas Expansion and Digital Assets Open New Growth Points

Futu's growth recovery is not coincidental but supported by several clear driving factors.

First is the successful overseas expansion. Since 2021, Futu has shifted its focus to markets outside mainland China, and by the second quarter of 2025, its penetration rates of paying customers in Hong Kong and Singapore had reached approximately 30% and 20%, respectively. The Malaysian market, entered in the first quarter of 2024, also achieved a low double-digit market share by 2025.

Secondly, Futu is not only expanding its customer base but also increasing the asset share of individual customers. Data shows that in the first half of 2025, its net asset inflow grew nearly 100% year-on-year, far exceeding the 40% growth rate of paying customers during the same period, indicating its success in high-net-worth customer service and wealth management business More importantly, Futu is actively laying out its strategy in the digital asset field. The management proposed a comprehensive "R-A-C-E" strategy during the second quarter earnings briefing, covering the tokenization of real-world assets (RWA), building advanced technology, facilitating customer conversion to digital products, and applying for a Virtual Asset Trading Platform (VATP) license to launch exchange operations.

The report believes that although the revenue contribution from digital assets may be limited before 2027, it could become a key catalyst for valuation re-evaluation, as demonstrated by the experience of its peer Robinhood.

Peer Valuation Discount Expected to Narrow

Compared to global peers, Futu's valuation discount is particularly pronounced, which is precisely where its potential upside lies. According to the report, based on Bloomberg's forecasts, Futu's expected price-to-earnings ratio for 2026 is 20 times, far lower than Robinhood's 52 times, Interactive Brokers (IBKR) 29 times, and East Money's 32 times.

However, Futu shows stronger competitiveness in core financial metrics. Its expected return on equity (ROE) and earnings per share (EPS) compound annual growth rate (28%) for 2024-2026 are the highest among peers.

JP Morgan believes that the main reason for this valuation discrepancy is the market's concern over regulatory risks related to Futu's mainland business. However, over time, the impact of this risk factor is diminishing.

The report points out that the contribution of mainland business to Futu's paying customers and asset management scale has decreased from about 40% and 50% in 2021 to about 20% and 30% in the first half of 2025, respectively.

At the same time, regulatory policies have clearly allowed continued service to existing customers. JP Morgan believes that regulatory uncertainty is now far lower than the levels seen from the end of 2021 to 2022, thus the reasons supporting the valuation discount are disappearing