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Canaccord Genuity doesn't expect 'supernormal' activity to repeat at CMC Markets

By Alexander Bueso

Date: Thursday 22 Jul 2021

Canaccord Genuity doesn't expect 'supernormal' activity to repeat at CMC Markets

(Sharecast News) - Analysts at Canaccord Genuity hiked their target for CMC Markets from 326.0p to 463.0p but kept their recommendation at 'hold', telling clients that they spied both downside and upside risks to the outlook - although the two were "balanced".
Following a record 2021 financial year for client acquisition, there was the possibility that income per CFD client might decline in FY2022 by more than the 3% they had penciled-in as market volatility and leverage restrictions in Australia bite.

The number of active CFD clients was another potential risk and marketing spend was expected to rise to offset that.

Not only might the number of client acquisitions fall short of the 22,000 new traders they anticipated for FY 2022, churn might also outstrip their forecasts, the analysts added.

On the other side of the equation, the percentage of gross client income retained was a "clear" source of upside risk as was the potential opportunity in UK wealth management, the latter both in the near and medium term.

Canaccord also highlighted the dividend yield on the firm's shares, which at 4.4% they termed attractive.

And while the broker revised higher its estimates for CMC's diluted earnings per share for FY 2022 and FY 2023 by 64% and 75%, respectively, it reverted to using CMC's average one-year forward price-to-earnings multiple since listing when valuing the company.

"This reduction in target multiple reflects the current point in the cycle, post the period of supernormal activity experienced. Over the next 12-24 months, we believe this is unlikely to be repeated."


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