Numis Securities has upgraded its stance on IG Group PLC (LON:IGG) to ‘add’ from ‘hold’ after the online financial trading firm’s first quarter numbers beat its expectations.
In a note to clients, Numis analysts pointed out that IG’s reported revenue growth of 21% for the first quarter was well in excess of the 5% growth they had forecast.
READ: IG Group reports record quarter despite quieter financial markets
They pointed out that global volatility “remained low through the period, although it would appear that IG's clients have adjusted to this environment.”
The analysts also noted a significant increase in crypto currency interest and the volatility in instruments such as BitCoin through the period, although they said this remains a small part of the IG business.
They also pointed out that IG’s stockbroking business performed very well, with customer numbers increasing by 135% to 24,200 and revenue per client rising by 21%.
The analysts said: “While overall revenues remain modest in this division (£0.9mln in Q1) it is encouraging to see this business successfully build scale.“
Forecasts up, target price raised
The Numis analysts upgraded their revenue forecast for IG by 7% to £525mln from £488mln for this year and raised their profit forecast by 12% to £228mln from £203mln.
They said: “We continue to conservatively model a significant negative impact from increased regulation next year but our revenue and profit forecasts increase by a similar amount to this year.”
As a result of the increase in estimates, the analysts hiked their price target for IG shares to 697p from 638p.
In late morning trading, IG shares were 0.6%, or 3.5p higher at 622p.