Plus500’s Q2 Revenue Jumps 74%, Stock Price Surges 11%
Israeli trading platform operator Plus500 released its financial results for the second quarter, saying that revenue increased based on new customers. The improvement comes after a disastrous first quarter, as the broker was hit by tighter regulation and low volatility.
Share Price Jumps 11%
Following the release, the price of Plus500 stock, traded on the London Stock Exchange (LSE) with the ticker PLUS, jumped over 11% on Tuesday, after losing over 60% year-to-date. The surge helped the stock be among the best performers of London’s midcap index.
Revenue in the second quarter rose to $94 million, which is 74.4% than the $53.9 million revenue figure recorded in the previous quarter. Thus, the total revenue for the first half is $148 million, way below the $465.5 million level that the company noted in 2018. The weak results came after the European Securities and Markets Authority (ESMA) implemented new rules to protect retail investors from risky investments. Plus500 isn’t the only broker to be affected by the new changes – IG, CMC Markets, and other CFD trading platform providers struggle as well.
Besides, the CFD and forex brokers operating in the European Union (EU) have also been hit by a decline in the volatility of most of the financial markets, which don’t allow retail investors to generate returns from short-term fluctuations.
However, in the second quarter of this year, the VIX volatility index, rose about 10%, which is a good sign for CFD trading platforms.
Berenberg analysts commented:
In calendar Q1, market conditions proved difficult for the contracts for difference (CFD) brokers, and Plus500 was no exception. The market rebounded strongly but with relatively low volatility. Conditions have improved in Q2.
Client Spreads Improved as Well
Plus500 reported that client spreads and overnight charges rose in quarterly terms as well. In the second quarter, the company noted a level of about $93 million, which is a 13.4% increase from the $82 million recorded in the previous quarter. Thus, the total level for the first half of 2019 is about $175 million.
Almost half of the first half revenue came from outside the European Economic Area (EEA), which includes 31 countries. About 23% was generated by Elective Professional Clients inside the EEA region.
In its statement, Plus500 also touched upon the cost of marketing:
Of note, there were signs of reduced levels of marketing across the Company’s peer group which, along with continued strong and focused marketing investment by Plus500, led to an increase in the rate of new customer recruitment and a reduction in the average cost of acquisition.
Peel Hunt analysts estimated that the share of marketing is about 75% of the company’s costs, while the costs of new user acquisition account for 80% of marketing costs.
Plus500, which has subsidiaries in the UK, Cyprus, Singapore, and Bulgaria, said that it would release the full results for the first half in August.
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