Interactive Brokers (IBKR)

IBKR is a global, low cost trading platform for active traders that is fully scaled and has ~60% operating margins.

Globally, there has been a surge in interest in equities and investing. Russia, U.S. China, Sweden, UK, Israel, Brazil etc, have all seen a surge in account openings. We can debate the reasons why, but the resulting account growth is something that may not be a short term phenomenon. E.g. Russia has decided to tax bank deposits to fund its coronavirus package. 

• The international growth opportunity for IBKR is very large, with little competition. International makes up 63% of accounts, ~50% of client assets. 

• IBKR account growth has accelerated to >30%, but near-term this has been eclipsed by falling interest rates and net interest income compression. 

• IBKR account growth can sustain ~15% plus over the next few years.

• We see little downside in EPS estimates. Upside scenario gives EPS 16% and 27% above street for 2021 and 2022 respectively. 

Free option on interest rates ever rising. (Not in our upside scenario)  

One thing that may put you off, shareholder structure: Thomas Peterffy controls 81.5% of the voting and economic interests of the company. Liquidity is ~25$m per day.

Potential Upside:     $74 (+50%)

Sensible Downside: $42 (-15%)

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