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Virtu Financial, Inc. (VIRT)
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So does this stock do well when the stock market is up or down?
25$ NEXT WEEK.....
James & Roberto:
Saw your comments about how the stock price may be priced in. If this is the case (which I doubt), it would only be short term, and let me explain why.
Vaccine isn't coming for a year. People are going to be weary of travel. Think about how that affects the market until a vaccine is here. Once we reopen, the FED will be less active. Then, the market will return to fundamentals. The problem is that the fundamentals will look disastrous. The stock market will then decline further. This may bring the FED back into action but by then the market will realize the full picture. Why is this important? Because of the VIX. This is the only metric we, as VIRT shareholders and/or call options holders, should be looking at. An elevated VIX pretty much guarantees a strong VIRT. This company may be very conservative in their trading approach...but the're still making a boatload of money in an environment of an elavated VIX. The VIX, IMHO, is here to stay for at least another half a year (if not longer). If there's an actual depression? Then longer. I therefore believe that VIRT full year revenues will be somewhere around $3 billion total (probably $2.5 billion from trading income).
WORST CASE SCENARIO in the scenario I laid out above? A $45-50 VIRT stock price in one year. We will no doubt have bump ups before the 12 month period plays out. I will buy on margin (which I never do because I'm scared of a margin call in the case of a total market collapse and somehow VIRT goes down with it) in a few months.
We will live into the answer as too how far VIRT will get hammered, but according to my calc, VIRT will still earn $.90-$.95/share with the possibility of $1.00+ as interest rate expense will down, one extra trading day in the 3rd Q vs 2ndQ and Sept having more volatility than July or Aug.
So, even in a ho hum Q, VIRT earns approx $1.00/share, so at $24 the PE is 6-a ho hum Q annualized.
Long term growth drivers are increasing market share as C got out of the business today, selling of services and increased options penetration. Also, interest and real estate footprint expense should be consistently moving lower Q/Q.
Swings of optimism and pessimism should move the stock from $23ish to $35ish.
Just mentioned on closing bell as a good trade, by Josh whatever.
Why is this stock not more popular? A P/E of 6 big yeild and tons of profit/growth?
This stock is going to hit $30, minimum, over the next 3-4 weeks (if not sooner). They reported February earnings on March 3. When they did so, they only captured the last few days of volatility. Since the beginning of March, the market has been volatile (that's an understatement). I honestly would not be surprised to see an average of $15 million/day in income from trading since the beginning of March. That would mean they have already made $120M this month. Even assuming a return to normal for the remainder of the month, they will have made about $200M in March - about a 100% increase over February. It's gonna be incredible.
Why is the stock down after surpassing earnings & revenue estimates?
SEC Filing relating to the line of credit from Vincent Viola. "The Borrower intends to use the proceeds of the Loans solely to finance the purchase and settlement of securities and to fund margin deposits with the National Securities Clearing Corporation and Options Clearing Corporation." Why the need to fund margin deposits? More cash needed for more trading?
I can already see what's going to happen. We hover around $23...maybe drop to $21-22 depending on how bad the market is next week. Or, we might move up slightly...but the rang will be $21-25 before earnings. We won't see less or higher than that. My guess is we trade down until earnings ($22.50-23), and then get a 10%, MAYBE 15%, pop on earnings release....but by the time the market opens, probably half those gains disappear. There are too many people holding $30C options, both in May and June. I don't mean to sound like a conspiracy theorist (I am not and I HATE people who use them), but I simply believe there are way too many people standing to make a lot of money. So, I just don't see it happening. Depending on the price on May 6th, come May 7th we'll see a stock price of somewhere between $23-28 pre market...then it drops. The big move probably won't happen until next earnings call (and will only happen if volatility/volumes stay high).
I will add to the conversation. I think some traders, perhaps algos, are using VIRT as a VIX substitute. So, on market up days, they are shorting VIRT instead of shorting VIX. At some point in time, because of the yield, the shorts won't be able to push VIRT any lower-my guess is around $21.00. I continue to accumulate because I think the stock is way under valued and misunderstood.
Not sure why there isn’t more interest in VIRT. Best/safest volatility play. Low PE with 3.5% div.
Where does everyone "read" about these warrants that price today? I looked over the 10K and proxy and saw:
1)3.077 warrants priced at $19.00
2)3.0 million RSUs priced at about $24 that expire in about 5 years.
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Virtu Financial is down 5.32% to 32.01
WHO SAW THE NUMBERS?!?!?! OMFG!!!!! WE BETTER GO TO THE MOON!!!!!!!!!!!
James & Roberto (and other new posters):
I have just (partially) read the 10K, which you can see here:
Some points stand out:
1) "Our revenues and profitability depend in part on the level of trading activity of securities, derivatives and other financial products on exchanges and in other trading venues in the U.S. and abroad, which are directly affected by factors beyond our control, including economic and political conditions, emergencies and pandemics, broad trends in business and finance and changes in the markets in which such transactions occur. Weaknesses in the markets in which we operate, including economic slowdowns in recent years, have historically resulted in reduced trading volumes for us. Declines in trading volumes generally result in lower revenues from market making and transaction execution activities. Lower levels of volatility generally have the same directional impact. Declines in market values of securities or other financial instruments can also result in illiquid markets, which can also result in lower revenues and profitability from market making and transaction execution activities. Lower price levels of securities and other financial instruments, as well as compressed bid/ask spreads, which often follow lower pricing, can further result in reduced revenues and profitability."
2) "We require liquidity to fund various ongoing obligations, including operating expenses, capital expenditures, debt service and dividend payments. Our main sources of liquidity are cash flow from the operations of our subsidiaries, our broker‑dealer revolving credit facility (described under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Long-Term Borrowings”), margin financing provided by our prime brokers and cash on hand. Our liquidity could be materially impaired by a number of factors, including reduced business activity due to a market downturn, adverse regulatory action or a downgrade of our credit rating. If our business activities decrease or we are unable to borrow additional funds in the future on terms that are acceptable to us, or at all, we could suffer a material adverse effect on our business, financial condition, results of operations and cash flows."
3) Read the entire section labeled "We have a substantial amount of indebtedness, which could negatively impact our business and financial condition, and our debt agreements contain restrictions that will limit our flexibility in operating our business." I won't post it here because it's too long.
If I'm reading it correctly, it basically says that as of December 31, 2019, the company had a $300M credit facility (of which $30M was used so far), an additional $600M broker-dealer revolving credit facility with no borrowing so far. And, certain of their non-guarantor subsidiaries are party to various short-term credit facilities totalling $586M, of which there were $134.3M in borrowing.
This begs the question: why did they take yet ANOTHER $450M in a credit facility deal? Anyone have any insights?
In the 10K, there's also other notes basically saying that low market trading volume will negatively impact them (there has been low levels for about 2 weeks now - since this mini bull run). Also, they mention that a pandemic generally isn't good for their business.
Sorry for the wall of text; have a $27K bet riding on this. What do you guys honestly think?
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Heavily manipulated stock. Unless a market crash happens, VIRT will probably fall back to its baseline of about $15-20 IMHO. It's a great company no doubt. The stock price, however, probably won't follow.
question.: is VIRT in the list of those hedge funds which've been shorting AMC?
Price is all over the place today. Not really sure why, having a hard time explaining it. But regardless, ER gave confidence to hold through second quarter. I just hope my June calls survive lol
This volatility and increased transactions are pure gold for VIRT. I guess there are chances to see another great quarter.
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