Futu Holdings Gains 59% in a Year: Should Investors Ride the Rally?

Core Viewpoint - Futu Holdings Limited (FUTU) has demonstrated significant stock performance, with a 59.3% increase over the past year, outperforming its industry and the Zacks S&P 500 Composite, indicating strong market positioning and growth potential [1][4]. Performance Comparison - FUTU has outperformed industry peers such as Amplitude, Inc. (AMPL) and Alithya Group Inc. (ALYAF), which saw declines of 11.3% and 20.7% respectively over the same period [1]. - In the last six months, FUTU shares rose 6%, while the industry and Amplitude declined by 17.3% and 19.4% respectively, showcasing FUTU's resilience [4]. Customer Base Expansion - In Q4 2024, the number of paying clients increased by 39.1% year-over-year, contributing to a 41% increase in 2024 [6]. - The total number of registered clients and users grew by 28.7% and 16.2% year-over-year in Q4 2024, leading to an 86.8% surge in revenues for the same quarter [7]. - The company anticipates acquiring 800,000 new paying clients in 2025, suggesting sustained revenue growth [7]. Operational Efficiency - The incorporation of AI, specifically through the deployment of DeepSeek, has enhanced operational efficiency, reflected in a 116.6% increase in operating income and a 690 basis points rise in operating margin year-over-year in Q4 2024 [9]. Valuation Metrics - FUTU shares are currently priced at 11.72 times forward 12-month earnings per share, significantly lower than the industry average of 27.06 times, indicating a potentially undervalued stock [11]. - The trailing 12-month EV-to-EBITDA ratio for FUTU is 2.48 times, well below the industry average of 19.54 times, further supporting the argument for a discounted valuation [13]. Profitability and Growth Prospects - Futu Holdings has a trailing 12-month return on equity (ROE) of 20%, outperforming the industry average of 6.4%, indicating effective use of shareholder investments [15]. - The Zacks Consensus Estimate projects FUTU's 2025 revenues at $2.1 billion, reflecting a 22.8$6.92, suggesting a 38.1% increase [17]. Investment Recommendation - Given the substantial stock price surge, discounted valuation, effective use of AI, and strong client inflow, Futu Holdings presents a compelling investment opportunity [18].