UP Fintech Holding Limited (NASDAQ:TIGR) continues to show strong growth momentum beyond one-off provisions, making it an attractive investment option for the future. Despite a headline earnings miss in the second quarter of 2024, the company’s positive growth trajectory is undeniable.
Revenue Growth Acceleration
In the second quarter of 2024, TIGR reported a significant revenue growth acceleration of +32.4% compared to the previous quarter. This growth was driven by higher commissions, financing service fees, interest income, and other revenues. Commissions, in particular, saw a substantial increase of +54.9% year-over-year, reaching $34.1 million for the quarter.
The surge in commission revenue was supported by a +62.5% year-over-year increase in trading volume, totaling $105.9 billion, and a +68.2% year-over-year jump in newly funded accounts, reaching 48,900 for the quarter. The company attributed this growth to a more active market environment, leading to a robust performance in the second quarter.
Favorable Growth Outlook
Looking ahead, TIGR remains confident in its growth prospects, aiming to achieve at least 150,000 newly funded accounts in 2024. The company’s operations in Southeast Asian markets, particularly in Singapore, have shown significant improvement in user activity and stickiness, driven by new products and services.
The number of newly funded accounts continued to grow rapidly in July and August, indicating sustained momentum in the second half of the year. This growth is expected to fuel strong commission revenue for UP Fintech as it expands its customer base and market presence.
Limited Impact of Interest Rate Movements
TIGR remains resilient to interest rate fluctuations, with a potential to offset any weakness in interest income through increased market activities and trading volume. Even a 25 basis points Fed rate cut is estimated to have only a minimal impact of approximately -1% on the company’s fourth-quarter top line.
Non-Recurring Item Impact
Despite a drop in GAAP net profit in the second quarter of 2024, largely due to a non-recurring provision related to the suspended Hong Kong stock pledge business, TIGR’s underlying performance remains strong. The company clarified that this provision was a one-off item and would not affect its future bottom line performance.
Operating Leverage Effects
UP Fintech’s operating leverage is expected to drive future earnings growth, as seen in the company’s ability to maintain a lower increase in operating costs compared to revenue expansion. With a strong revenue outlook and favorable operating leverage effects, TIGR is poised for healthy net profit growth in the coming quarters.
Appealing Valuations
The market currently values UP Fintech at a reasonable multiple of 12.6 times consensus FY 2024 normalized P/E, making it an attractive investment opportunity. Compared to its peers, TIGR’s valuation is relatively lower, indicating potential upside in the stock price based on its future earnings growth projections.
Key Risks
Despite its positive growth outlook, TIGR faces certain risks, including potential disappointments in interest income and total revenue if the Fed implements larger-than-expected rate cuts. Weak performance in financial markets could also impact the company’s commission revenue and overall top-line growth.
Conclusion
UP Fintech’s strong growth momentum and favorable financial outlook make it an appealing investment option for investors. With a low-teens P/E multiple and promising growth prospects, TIGR presents an attractive opportunity for those looking to capitalize on the company’s potential for future earnings expansion.