Some companies have struggled to recover since March’s market crash. Others have thrived. Online trading platform and FTSE 250 member Plus 500 (LSE: PLUS) is an example of the latter.
That said, Plus’s shares were in negative territory this morning, despite the mid-cap providing an impressive update on Q3 performance. What’s going on?
FTSE 250 market crash winner
Let’s look at those numbers first. Helped by “unprecedented levels of market volatility“, revenue at the Israel-based firm came in at a superb $216.4m over the three months to the end of September. This was almost double that achieved over the same period in 2019 and brings revenue in the first nine months of 2020 to $780.6m. That’s an increase of 202%!
Earnings before interest, tax, depreciation and amortisation (EBITDA) hit £134.2m — up 91%. In 2020 to date, earnings have improved by a staggering 266%.
No doubt helped by people spending more time at home, Plus added a little over 46,000 new customers to its books in Q3. Indeed, almost a quarter of a million people have signed up to trade with the company in 2020 so far. Unsurprisingly, the number of customers that are actually ‘active’ has also risen far higher than over the same stretch of time in 2019 as traders look to profit from uncertain markets.
So, why are the shares down?
I can see be a couple of reasons.
For one, the fact that today’s numbers are so good isn’t surprising given what’s happened in 2020. Indeed, Plus’s customer income during Q3 was the second-highest in the company’s history.
That said, this was lower than the record levels achieved in the previous quarter. What’s more, the FTSE 250 constituent mentioned today that this drop has continued into Q4. As such, management now believes that revenue and EBITDA for the full year will be “in line with current analysts’ consensus forecasts”. Those looking for more may have been disappointed and banked some profit.
Another reason for Plus’s share price fall this morning could be the proposed regulatory changes to CFD trading in Australia. Although not unexpected, Plus has said that these changes — due to be implemented next March — will require modifications to its business model to ensure complete compliance. Again, some profit-taking is perhaps understandable.
Had you picked up a slice of the firm in January, you’d be looking at gains of around 70%, even after today’s price tumble. That’s clearly far better than the 20% fall in the FTSE 250.
Will it continue? Plus’s board certainly thinks so. As CEO David Zruia stated, the “macroeconomic and sector-specific news flow” should provide customers with “significant trading opportunities” going forward. Although I’m not a believer in the cryptocurrency, the fact that Bitcoin recently passed $13,000 for the first time in almost three years also bodes well as people can bet on it through the platform.
Even if volatility lessens, there’s still the dividends to enjoy. Moreover, Plus is in rude financial health. With $722.9m in cash at end-September, an acquisition spree looks increasingly likely to me.
FTSE 250 buying opportunity
As a holder of FTSE 250 member and peer IG Group, I’m clearly biased when it comes to making a judgement on this industry. Nevertheless, I can see trading platform providers continuing to do well into 2021.
While investors must keep their expectations in check, I’m inclined to regard today’s share price dip as an opportunity.
The post This FTSE 250 growth share has tumbled 10% today! I think this could be a buying opportunity appeared first on The Motley Fool UK.
Paul Summers owns shares of IG Group Holdings. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020