Flatexdegiro AG: A Leading European Online BrokerOverview
FlatexDEGIRO AG, a European online brokerage leader, stands out for its scalable business model and significant market potential. With over 2.8 million customers, FlatexDEGIRO is one of the largest online brokers in Europe. This report outlines the potential investment upside, the reasons for past stock declines, the unique aspects of its business model, and future growth prospects. The stock offers an opportunity to achieve 3x to 5x returns over the next three to five years.
Investment Thesis
1. Scalable Business Model: FlatexDEGIRO’s online brokerage platform benefits significantly from economies of scale. Expanding customer numbers has a limited impact on the platform's operational costs while significantly enhancing profitability. This scalability, combined with rising trading activity, positions the company for substantial bottom-line growth. With appropriate operational improvements, FlatexDEGIRO can leverage its customer base more effectively.
2. Market Consolidation in European Brokerage: The European brokerage market is consolidating, with smaller players being acquired or exiting due to rising regulatory costs and competitive pressure. This environment allows larger players like FlatexDEGIRO to acquire market share cost-effectively. This consolidation could reduce competition, giving dominant players a stronger hold over pricing, customer engagement, and regulatory adaptations.
3. Activist Shareholder Influence: Bernd Förtsch, the founder and major shareholder of FlatexDEGIRO, has recently taken a more active role in reshaping the company's governance, including advocating for changes to the supervisory board and executive management. This activism suggests a potential shift towards more disciplined cost management and a renewed focus on growth. With better management of operational costs, FlatexDEGIRO has room to improve profit margins.
4. Re-engaging Dormant Customers: Approximately 1.3 million of FlatexDEGIRO's 2.8 million customers are relatively inactive in trading. Increasing engagement within this subset through targeted communication and trading ideas could enhance transaction-based revenue without a corresponding increase in marketing expenditure.
5. Minimal Regulatory Exposure in Order Flow: Unlike some peers, FlatexDEGIRO has no dependency on "order flow" revenue (payments for order flow, or PFOF). This reduces regulatory risk since PFOF is under scrutiny by European regulators. As such, FlatexDEGIRO’s revenue stream remains resilient to regulatory shifts, positioning it as a potentially safer choice in a tightening regulatory environment.
Risks and Challenges
1. Regulatory Environment: The European financial sector faces increasing regulatory scrutiny, driving up compliance costs. Although larger players like FlatexDEGIRO may benefit from this trend by acquiring smaller firms unable to bear these costs, regulation may still weigh on profitability and limit operational flexibility.
2. Past Operational Inefficiencies: Historical mismanagement, such as high executive compensation packages (e.g., €28 million for the executive board in one year with €72 million in annual profit), has negatively impacted FlatexDEGIRO’s profitability. While these issues may be addressed by the founder’s renewed involvement, any lingering inefficiencies could delay or diminish the expected upside potential.
3. Customer Reactivation Efforts: Although reactivating inactive customers could provide significant upside, there is no guarantee that these customers will respond positively to engagement efforts. The competitive landscape and shifting customer preferences could impact how effectively FlatexDEGIRO reactivates its customer base.
Financial Position and Growth Potential
• Strong Cash Position and Debt-Free Status: FlatexDEGIRO’s solid balance sheet, with no debt and considerable cash reserves, supports potential investments in marketing, acquisitions, and product improvements without raising additional capital.
• Valuation Upside: With disciplined cost management and strategic acquisitions, FlatexDEGIRO is positioned to multiply its revenue and profit. I think the stock has potential for a 3x to 5x increase in value within three to five years, primarily through a combination of market expansion, increased trading activity, and operational efficiency gains.
Conclusion
FlatexDEGIRO presents a compelling investment opportunity with potential for good returns due to its scalable model, strategic positioning in a consolidating market, and recent shareholder activism. The company’s minimal exposure to regulatory risks associated with order flow payments, coupled with a favorable balance sheet, makes it well-positioned to capitalize on growth opportunities in the European online brokerage sector. While regulatory changes and customer engagement efforts pose risks, the company’s upside potential makes it an attractive candidate for investors with a moderate risk tolerance and a long-term view.
This information is for informational purposes only and does not constitute financial or investment advice. Always do your own research or consult a financial professional before making investment decisions.
FTK trade ideas
FlatexDegiro...will it respect the macro trend?
The flatexDegiro stock has a history from November '16 until now and is in an uptrend, following a diagonal line that has been providing support during the price corrections over time.
The first uptrend cycle occurred between December '16 and May '18. The price rose by 176% from the minimum and reached the algorithmic level 1.62.
The subsequent correction occurred between May '18 and December '18, the month in which the minimum was reached. The price corrected by 57%. This minimum was made at a bullish OB on the 3M and is the second point that originated the oblique trendline. In the price's reaction to this OB, the price began to reverse, making a higher low afterward at the 0.79 level.
Between December '17 and June '21, the price rises by 671%, reaching the algorithmic target (1.28) of the retracement of the previous decline.
From June '21 to December '22, the price retraces again, correcting 81%. It finds support again at a bullish OB on the 3M that had confluence with the algorithmic level of 0.79 retracement of the previous upward movement. This zone coincides with the oblique trendline.
It's safe to say that the price, finding support in the mentioned zone, reversed the trend, initiating the new uptrend movement.
So since December '22, a new uptrend has begun, where the price has been making higher lows, respecting the swing lows and making higher highs, violating the swing highs. The price action has thus been bullish. This price action has created a new diagonal trendline with a steeper slope. The last swing high reinforced liquidity at the level of around €11.7. Then the price retraces, touches the oblique trendline again, and breaks through that liquidity zone, causing a market structure break.
This was yet another signal and final confirmation that we are indeed in a new uptrend.
In the short term, the level of approximately €16 is a zone of interest and where a reaction is expected. There is a volume imbalance with confluence of the 1.62 retracement of the last corrective movement and also confluence with a bearish propulsion block.
From a long-term perspective, we can establish the median of the fork and the first prominent algorithmic level as targets. If the macroeconomic situation is favorable, it's not unreasonable to see the stock price reaching around €48.
FlatexDEGIRO - Technical AnalysisA flatex degiro follows an upward trend, with a oblique trendline that has served as support for it twice, in October 2018 and in October 2022.
In the steepest declines it experienced, it corrected in both instances to the algorithmic level of 0.79, both with the confluence of an order block on the 3-month timeframe:
The price, since it made the recent low at 5.58, reversed and started an uptrend, respecting the bullish arrays and retracing to the expected algorithmic levels (0.5/0.618). It struggles with the resistance of a monthly bearish FVG, which it has already touched and reacted to four times without fully breaking it.
In the weekly timeframe, it can be observed that the price is currently retracing from the last reaction at the mentioned bearish FVG. It came to the 0.5 retracement level. Despite having a propulsion block below with confluence of algorithmic levels 0.705/0.79, there isn't much liquidity in the recent upward movement to rebalance, as the movement was executed fairly.
So far, the price remains bullish in the long term, respecting the bullish arrays on higher timeframes. It gave a positive signal by recently breaking structure. Looking ahead, the price range between 15.10 and 18.66 appears to pose some resistance.
Double Head and Shoulders patternThe daily chart shows two "head and shoulders" patterns.
They both tell different stories because they point in opposite directions.
The larger one (inverted) is bullish, while the smaller one, which is also slightly hidden, is bearish.
Whatever the case, the price is getting squeezed into a smaller space, so the breakout will be powerful.
Resistance: 10.165, 11.095, 12.57
Support: 9.41, 8.675
Trading Idea: FlatexDEGIROBUY
ENTRY 106.00 EUR
TARGET: 115.00 EUR (8.5%)
STOP: 102.80 EUR
1.) Strong and intact upward trend after correction phase in February and March 2021
2.) Trend continuation confirmed by the bearish ascending triangle with a rising lower trend line!
3.) The online broker's first quarter did much better than expected. The number of customers has increased significantly.
4.) flatexDEGIRO is growing faster than three major competitors in Europe together - forecast for 2021 increased again significantly. New location in Hamburg confirms growth plans.
DeGiro long and strongWhat can you say about that chart, it's a beauty, why didn't I invest last year when they got taken over by Flatex ... because I'm an idiot! This is my own broker here, let's have some numbers and see what's going on with them and why they are rising so steadily.
Flatex got cleared to by DeGiro last Summer, DeGiro were already well on the way to becoming Europe's biggest broker but Flatex and a pandemic may have accelerated that. Basically the figures are very very impressive, if this was an American company it would already have jumped 100% but because it is a Euopean/German company and we are all more reserved about things over here it will be a steady riser over the next few years. I got to the party quite late but I am very confident that I will make money for years to come on this.
From Sept 2019 to Sept 2020
+45% - no of customers
+100% - no of trades
+67% - amount of revenue
What's not to like about that? No of customers is well on the the way to 2 million now and I believe DeGiro is the largest European broker at the moment or it will be by the end of the year. There is no reason to beleive that the growth will not continue, if they could partner with TradingView then I believe this would accelerate them even faster.
FROM BLOOMBERG
Corporate News / Frankfurt/Main, 02. February 2021
flatexDEGIRO's accelerated growth results in a record month and a
significantly raised guidance
- Record start in January 2021 with more than 130,000 new customers and 11.4m
transactions
- Commercial guidance for 2021 significantly raised
- FY2021e: 550k to 750k new customers (previous guidance: over 350k)
- FY2021e: Total number of customers to grow to 1.8m - 2.0m (previous
guidance: over 1.6m)
- FY2021e: Settled transactions to increase to 75m - 90m (previous guidance:
65m - 75m)
- Expected accelerated growth will have a significant positive impact on
revenues, earnings and free cash flow in 2021 and subsequent years
Frankfurt/Main - flatexDEGIRO AG (WKN: FTG111, ISIN: DE000FTG1111, Ticker:
FTK.GR), Europe's largest retail online broker, continues its trailblazing
growth path. Driven by an ongoing and accelerating growth momentum in its core
markets, flatexDEGIRO today significantly raised its full-year 2021 guidance
and expects to extend its position as the fastest growing online brokerage
business in Europe.
In January 2021, the leading European online broker executed 11.4 million
transactions, an increase of almost 200% year-on-year (January 2020: approx. 4
million transactions, pro forma). Over the last trailing twelve months,
flatexDEGIRO has thus executed over 82 million transactions (pro forma). Even
stronger was the growth in new customers, almost quadrupling to over 130,000
in January 2021 (January 2020: 35,000). The Group's total customer base has
thereby grown to almost 1.4 million.
"We continue to see strong growth and market share gains in our core markets.
In Germany, the successful launch of flatex-next provides additional momentum.
We have achieved record numbers in January, market volatility remains at a
sustainably high level and underlying secular trends in digitalization and
investing all over Europe continue to support our strategy. Based on these
factors we now expect to grow our business in 2021 to 1.8 million to 2.0
million customers, for which we will settle between 75 million and 90 million
transactions by the end of the year", says Frank Niehage, CEO of flatexDEGIRO.
After the tremendous success during the first month and the accelerating brand
awareness, flatexDEGIRO has basically doubled its expectations for new
customer growth in 2021 from at least 350,000 to a range of 550,000 to
750,000. The targeted total of 1.8 million to 2.0 million customers represents
a 40-60 percent increase compared to year-end 2020.
"Over the past years, we have invested a significant double-digit million Euro
amount in the performance, security and stability of our IT systems. In recent
weeks, our reliable technology platforms and our well-capitalized group have
once again proven to be a key differentiating factor in volatile markets. We
have offered our customers real added value that they have appreciated during
turbulent times", says Muhamad Chahrour, CFO of flatexDEGIRO. "The envisaged
business growth and our outstanding operating leverage paired with superior
technology and liquidity will enable us to further increase our financial and
commercial power and to extend our unique market-leading positioning in Europe
in the coming years."
With more than 1.25 million customers and 75 million securities transactions
in 2020, flatexDEGIRO is the largest retail online broker in Europe. In a time
of bank consolidation, low interest rates and digitalization, the flatexDEGIRO
Group is ideally positioned for further growth. Until 2025 at the latest,
flatexDEGIRO aims to win over 3 million customers and execute at least 100
million transactions per year - even in years with low volatility.
My target is long on this one, I expect an initial target of 100 euro to be met and over the next two years I expect another 100% on top of that
Not trading advice, just pattern recognition