Plus500 shares get upgrade but drop 6% after Q2 results announcement

Stock market investors can certainly be a fickle bunch.

After seeing its shares trade up more than 50% in the past month, retail forex broker Plus500 didn’t disappoint with its First Half 2014 results announcement:

  • Net profit increased 249% to $54 million, with half that paid out to shareholders in dividends.
  • Revenues topped $100 million, versus less than $45 million in last year’s first half.

Broker N+1 Singer raised its price target on Plus500 to £8.24, more than 60% above the current share price. Plus500 even stated that its outlook was bright, writing:

The Board looks ahead with continued confidence…. Whilst customer acquisition slowed in the second quarter, EBITDA margins have remained strong…. Current Q3 trading has continued to be strong and the Group is therefore confident of meeting market expectations for the year ending 31 December 2014.

But it looks like investors chose instead to focus on the differences between Q1 and Q2 at Plus500, sending Plus500 shares down 6% Wednesday. The main delta between Q1 and Q2?

  • Of its $106 million in first half revenue, more than $60 million was earned in Q1 — Q2 saw a near 25% drop to $46 million.
  • Q1 saw Plus500 sign up more than 20,000 new customers. In Q2? 12,549.

And most troubling? The increased cost of attracting those new clients. Clients acquisition costs (or AUAC, in Plus500-speak) rose from $546 in Q1 to nearly $1,000 ($993, to be exact) in Q2. Surely, part of the increase was due to Plus500’s relatively fixed ad budget simply attracting less new customers in Q2, as volatility in the markets stayed low. But still, investors were somewhat spooked about the potential long term implications of higher acquisition costs.

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