Questor share tip: Time to take some profits at Plus500

The Aim-listed online trading group, has seen its shares more than triple so it seems prudent to bank some profit, says Questor.

Plus500 said it has seen “significant growth” in the first quarter with a threefold increase in revenues and a jump in new customer numbers.
Plus500 said it has seen “significant growth” in the first quarter with a threefold increase in revenues and a jump in new customer numbers. Credit: Photo: AFP

Plus500
618p+15
Questor says HOLD

SHARES in Aim-listed online trading platform, Plus500, have been affected by the wider sell-off in technology stocks. After a fantastic run, during which the shares have risen by 322pc since Questor recommended them, it is worth revisiting the investment case.

The company has expanded rapidly by offering the opportunity to take bets online on the financial markets. The shares closed at an all-time high of 700p on April 10. But market jitters over the rating on technology stocks have seen them fall about 6pc during the past month.

The Plus500 platform allows punters to make bets on financial markets. The bets are made through something called a contract for difference, or CFD.

An example of a CFD would be to agree a contract, or bet, of £10 for every point the FTSE 100 rises – the difference. If the FTSE 100 rises by 10 points from the point the bet was made to the market close, the gambler makes £100; if it falls 10 points, £100 is lost.

Running the business online means the company has low fixed costs, so, as new customers join, profits accelerate faster than revenue growth. Plus500 is winning an incredible number of new customers. The company said it had seen “significant growth” in the first quarter as revenue tripled on a year earlier.

Plus500 said that during the first three months of the year there were 50,438 active customers, up 48pc year-on-year, and customers are spending $1,204 each, more than double a year earlier.

House broker Liberum has upgraded forecasts for the current year by 20pc. The broker now thinks revenue will increase to $180m (£108m), giving pre-tax profit of $115.6m and earnings per share of 74 cents.

The trading platform generates a lot of cash and it likes giving that cash back to shareholders. Since the company was admitted to Aim in July last year it has returned 81pc of net profit through dividends.

Nothing has changed in the Plus500 investment story so it is a matter of banking some of those gains.

Questor first recommended buying the shares on October 18 at 147p. Readers who followed that advice have more than tripled their money and a received a dividend yield of 14.3pc. We repeated that advice in February and told investors to buy at 425p.

We’d take profits at this level by selling half the original stake and downgrade the recommendation to a hold.