Which Of These Fintech Stocks Is On Top Of Your List?
A volatile stock market, stay-at-home measures and some free time have many retail investors cashing in on the market. This has no doubt amplified trading activities and has added up to a trading boom for online brokers. As a result, fintech stocks have been significantly rewarded throughout the course of the pandemic. Many of these brokerage companies reported record trading activities and new sign-ups. Amongst them are Fidelity, Schwab, Robinhood, and Interactive Brokers. However, our discussion today will be more on the emerging online brokerage platforms from China.
Both Futu Holdings (NASDAQ: FUTU) and UP Fintech Holdings (NASDAQ: TIGR) were probably among the lesser-known growth stocks that had a massive rally. Lifted by the IPO boom in China, both online brokerages received a boost in blockbuster IPOs. A record 35 Chinese firms went public, selling $13.5 billion in shares in the U.S. via American depository receipts (ADR) deals. According to Dealogic, this is the most money raised by ADRs since 2014, and many of these deals were led by Futu and UP Fintech.
Futu is a company we have discussed several times in the past. With its most recently quarterly earnings report, FUTU stock sure seems like a good buy. The same thing could also be said of UP Fintech. While both seem like good candidates to hunt for growth, investors are also cautious with their valuations after a massive rally in the past few months. After all, these two are some of the best-performing stocks in 2020. However, if you are not afraid of investing in Chinese stocks and are looking to pick one to invest in today, which would be a better buy?
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Futu is an online broker that operates digitally through its Futu NiuNiu platform. It went public on Nasdaq in March 2019 at $12 a share. As one of the best-performing stocks in recent weeks, investors who bought during its IPO have reaped more than 1,400% gains. For starters, the company was founded in 2011. It provides online brokerage services in Hong Kong, Mainland China, and the U.S. Futu primarily generates revenue through fees and margin financing.
More impressively, the company has strong backing from notable shareholders like Tencent (OTCMKTS: TCEHY), Matrix Holdings, and Sequoia Capital. With the backing of a company like Tencent, coupled with the trending tailwinds, the potential for Futu to cement itself as a leader in China’s mobile and online brokerage is bright indeed.
Strong Fundamentals Continue To Drive FUTU Stock Higher
In the company’s latest quarter that was posted in November, it reported that the number of its paying clients increased by 136.5% year-over-year to 418,089. Futu’s total registered clients also increased by 79.7% to 1.17 million in that same period. The company also boasts a total revenue of $122.1 million, representing a 272.1% increase. In the quarter, the company’s wealth management business Money Plus had established partnerships with a number of reputable asset managers including Morgan Stanley (NYSE: MS). There’s no official date when Futu will announce its fourth quarterly earnings. But investors could expect to have it around March.
With how fast the coronavirus pandemic is reshaping the world globally, Futu has never been more relevant or favorably positioned. With some Chinese companies shying away from listing in the U.S., there could be more business going Futu’s way. The question is, can the company continue to record strong growth and keep its margins up? Considering Futu’s strong fundamentals and potential growths in the market it operates in, there could be more room for growth even after such a rally this year.
UP Fintech Holdings (Tiger Brokers)
Like Futu, Tiger Brokers is an up-and-coming online brokerage focusing on Asian traders. Most importantly, it is already profitable with its sign-ups and revenue growth rate of more than 100% year-over-year. Many analysts are long on TIGR stock, believing it is poised to become the Robinhood of China. Like it or not, Tiger Brokers carved out a sizable niche for itself with its low fees, user-friendly design, and a mobile-first approach.
It’s also worth mentioning that Tiger’s total customer accounts began to exceed 1 million in the past few months. While these numbers look promising, only a fraction of those accounts has actually been funded with deposits due to capital outflow restrictions. The real number here to watch moving forward is Tiger’s ability to increase the number of funded accounts. Should the platform continue to attract new sign-ups and at the same time increase its funded accounts, there will be a huge room for growth.
TIGR Stock Still Offers Significant Value Despite Recent Rally
Despite a significant jump in price since the start of February, analysts believe that TIGR stock still offers significant upside potential from a valuation standpoint. You see, the company is tapping into massive and fast-growing addressable markets like China. At the most basic level, investors aim to put their money to work. The hope is of course to generate a return to supplement their regular paychecks. And as China continues to grow at its current rate, activities from Chinese investors will likely exceed those of their American counterparts within the coming decade.
The company continues to post double-digit top-line growth rates in the domestic Chinese market. In the company’s latest quarter financials posted in November, the company reported a revenue of $38 million. That was an increase of 148.2% year-over-year. Its net income was $4.9 million for the quarter as well. UP Fintech also ended the quarter with $10.9 billion in cash. During the quarter, the company also expanded its brokerage capabilities as it began to facilitate clients in Singapore and Australia. With such a massive market up for grabs, we may be looking at a growth runway indeed.
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FUTU Stock Or TIGR Stock?
All in all, both companies are top growth stocks tapping on the rapid growth in China’s wealth and the more nascent state of its retail investing industry. Given the overall growth of stock trading activities, it’s reasonable to assume that both stocks could continue to perform. If we review the performance of these two fintech giants over the past years, FUTU stock was the better performer.
Nevertheless, you can’t really go wrong with either one of them. That’s if you plan to hold on for the long term. But if many investors only look at the nominal price of a stock, TIGR stock may be the more attractive one. The question is, would you be willing to pick them up on today’s dips?