Questor share tip: Why you shouldn't buy back into Plus500 just yet

The Aim-listed online trading group has delivered fantastic gains for regular readers but we wouldn't buy back in until we see the detailed numbers, 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
423.25p -47.25
Questor says HOLD

SHARES in Aim-listed online trading platform Plus500 [LON:PLUS] slumped by almost 20pc last week as short-sellers attacked the stock. Luckily readers of Questor were advised to bank gains of more than 300pc and take profits back in May.

The company, which allows people to make bets on financial markets through contracts for difference, or CFDs, was forced to issue a statement on Tuesday following the slump in the share price. Management confirmed revenue and profits were ahead of expectations and stated there was no operational or financial reason for the share price weakness.

Market consensus is for pre-tax profits to almost double in the current year to $120m (£70m) on revenue up sharply to $187m. The profits are advancing so quickly because running the business online means the company has low fixed costs. So, as new customers join, profits accelerate faster than revenue growth. The company said it had seen “significant growth” in the second quarter.

Revenue more than doubled and pre-tax profits rocketed by 191pc to $67.2m (£39.6m) in last year’s annual results. The strong results and confident outlook reported in February resulted in house broker Liberum upgrading forecasts by 80pc.

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 and management said it has a target of returning at least half of the earnings by way of dividend. The company will release more detailed half year numbers on August 13.

Questor first recommended buying the shares on October 18 at 147p and we repeated that advice in February and told investors to buy at 425p. However, with the market turning against tech stocks and Plus500’s shares being weak from April onwards we said “Time to take profits” on May 14 with share at 615p.

We still wouldn’t buy back into the shares until we have seen the detail in the interim numbers. The advice remains hold.