The report the company has recently unveiled seems to have not served in its favour, with the details scaring the investors, the latter are leaking away from the company's custody.
2018's performance was a matter of luck, and 2019 will not have much of fruits, apparently.
Plus500 tanks 30% yesterday after its management announced a massive 2018 and forecast a less attractive 2019.
February 13, 2019 | AtoZ Markets – Online CFD and forex brokerage, Plus500 has announced its preliminary unaudited results for 2018. After releasing a record in the first half of the year, the broker remained in profit throughout the year in key metrics. This performance saw the broker register a record revenue of $720.4 million in 2018, that is 65% more than $437.2 million recorded in 2017. Net profit also jumped by 90% from $252.9 million in 2017 to $379 million in 2018.
Plus500 Record Revenue and Profit in 2018
As per the company's statement, the record profits and revenues recorded were largely enhanced by an 'exceptional' first quarter, thanks to the upbeat in cryptocurrency trading. At that time, cryptocurrencies were just coming from their record highs after an exceptional 2017, which brought more interests to the market.
During the same period, crypto investors lost large part of their funds to the bearish market. However, the company's stock was officially listed on the FTSE 250 Index in September, but thereafter it underwent a drop in performance in the 3rd quarter. Yet, the company managed to maintain a profitable record year.
Performance Indicators and 2019 Bearish Forecast
Plus500 unveiled that it closed 2018 with a record number of 223,864 active clients. However, that figure slumped by 55% in the final quarter of 2018. The number of new clients declined even more swiftly, due to the crypto effect in the end of 2018. In Q4 of 2017, the company acquired over 150,000 new clients but that figure dropped to 19,405 in Q4 2018. User acquisition costs per clients in Q4 of 2018 rose 424% to $1,489 per client. Meanwhile, the average revenue per clients rose 158% to $1,523 per client Q4.
After a massive 2018, the company admits it does not expect a similar profit margin in 2019, predicting that both profit and revenue for 2019 will be materially lower than the current market expectations. The ESMA restrictions and the company's plans to maintain its marketing expenditure are two factors that governed the above mentioned.
The performance was a stroke of luck!
After the announcement, the company's share dropped over 30%., the thing that reportedly provoked the investors' dissatisfaction .
Cryptocurrencies are still struggling, with no signals in the horizon that the market will enter another upbeat level. The number of crypto traders has been on the decline after the 2018 huge loss. In contrast, the number of new crypto clients compared to 2017 is expected to reduce significantly.
The expected 2019 decline in the number of clients, revenue and the profit didn't come as a big surprise. It appears that Plus500 stock has been overvalued. The management's expectation for 2019 signals that the performance seen the last year was a one-off achievement for the firm.
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