Since, Robinhood is expected to go public soon, many traders have been playing Futu as a proxy for Robinhood. Of course, the Chinese Internet is segregated from the rest of the world which means there are many Chinese versions of popular US websites. And, it's worth noting that these Chinese versions have delivered outstanding returns to investors such as Baidu
Thus, investors should certainly keep Futu on their radar screens. Futu started operations in 2014 and was backed by TenCent, Sequoia Capital, and Matrix Partners. It's also expanded to nearby Asian countries. As of January 2021, it had 10 million users and $10 billion in assets on the app.
In its short life, Futu has started to gain traction and is continually adding younger users to its platform. Remarkably, the stock is positive which is unusual for a high-growth company. In 2020, it earned $105 million and expects $175 million profit in 2021.
The company's strong earnings report was the primary factor in the stock increasing by 5-fold between late-December and mid-February. Since then, Futu is down by 50% due to the selloff in growth stocks.
Still, the company has a $13 billion valuation. This means that investors are betting that the company will continue to grow via users and their account sizes. FUTU also seems to appeal to underbanked people in China and the younger generation given its attractive UI and simple setup. In its last quarter, users increased by 137% and assets by 178%.
The company also plans to offer higher margin products and services to its users as well. These could include financial advice, selling insurance, and other types of financial products.
Stock Price Outlook
Futu is much more attractive following its 50% dip. The correction in growth stocks could be reaching an end as bonds seems to have found a floor which should provide support.
Further, the Robinhood IPO could be a catalyst as Futu is growing faster and has half of the assets but one-third of the valuation. Further, there's simply more room to grow in China due to the hundreds of millions of people who are underbanked and not on any type of investing platform.