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Why Plus500 revenues dropped in Q1 2019

Maya Mandz | Apr. 12, 2019
Why Plus500 revenues dropped in Q1 2019

April 12, 2019, | AtoZ Markets - According to the recently published Plus500 Ltd first quarter of 2019 report, the online trading company’s revenue dropped from $ 154.8 million registered in the last quarter of 2018 to $ 53.9 million. The company representatives explained why Plus500 revenues dropped in Q1 2019 by almost 65 %.

Plus500 LTD in a brief

Plus500 is one of the largest international brokers in the world that enables its customers to trade CFDs over different financial instruments including equities, indices, commodities, options, ETFs, cryptocurrencies and Forex. Plus500 customers can trade CFDs in more than 50 countries and in 32 languages.

The company is listed on the Main Market section of the London Stock Exchange and is regulated in the United Kingdom, Australia, Cyprus, Israel, New Zealand, South Africa, and Singapore. The company has over 101,000 active investors trading with them.

Plus500 record revenue and profit in 2018

Earlier in February, Plus500 announced that it had closed 2018 with a record number of 223,864 active customers. However, this figure fell by 55% in the last quarter of 2018. The number of new customers has declined even faster, due to the interest in a crypto decrease at the end of 2018.

The cost of attracting users per customer in the fourth quarter of 2018 increased by 424% to the US $ 1,489 per customer. Meanwhile, the average revenue per customer increased by 158% to $ 1,523 per customer in the fourth quarter.

After the publication of the record in the first half of the year, the broker remained in profit during the year on key indicators. Due to this activity, the company registered record revenue in the amount of 720.4 million dollars in 2018, which is 65% more than 437.2 million. Dollars registered in 2017. Net profit also jumped 90% from $ 252.9 million in 2017 to $ 379 million in 2018.

While explaining record profits and revenues increase, the company official explained that it happened by the “exceptional” first quarter, thanks to a recovery in cryptocurrency trading. At that time, cryptocurrencies had just reached their record highs after an exceptional 2017, which brought more interest to the market.

The company officials try to explain why  Plus500 revenues dropped

The trading update of Plus500 Ltd for the first quarter of 2019 covered the period from January to March 31 and showed a pretty unflattering picture. According to the company's report over the past three months, in annual terms, the broker's revenue decreased more than it did in the same period in 2018.

Back in February, the company stated that it does not expect a similar level of profit in 2019, so the expected reduction in the number of customers, revenues and profits in 2019 was not a big surprise. The experts suggest, that Plus500 shares have been simply overvalued.

Explaining the reason why Plus500 revenues dropped in Q1 2019, the brokerage company mentioned that the main reason for such numbers is the strong suppression of financial markets for most types of assets. The low level of volatility affected the number of active clients and ARPU.

Also, according to the company, the number of active clients has decreased by 4 percent in the last quarter. The average income per user in the first quarter of 2019 was $ 550, while in the last quarter of 2018 it was 1,523 dollars, and in the first quarter of 2018 - 1,363 dollars. The average cost of attracting users was $ 1,230 in the first quarter of 2019 compared to $ 1,489 in the previous quarter but significantly exceeded $ 502 in the first quarter of 2018.

Plus500 LTD experts remain silent about the future forecasts

Plus500 LTD officials did not provide any specific forecasts regarding its future activities. The broker explained that it was impossible to predict market conditions for the rest of the year, and therefore it was too early to draw conclusions about the full year results based on performance.

Two months ago, the company officials stated: “Following our latest assessment of the impact of the ESMA regulatory measures, FY19 revenue is expected to be lower than current market expectations. This, combined with our intention to maintain our marketing spend, is likely to result in 2019 profit being materially lower than current market expectations”.

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