Thursday's IBD 50 Stocks to Watch pick is a leading financial stock in a long cup base, about 10% from a buy point. Interactive Brokers is second in its industry group and a new member of the IBD 50 list. Shares rallied Wednesday after a positive earnings release but gave back some gains on Thursday.
Connecticut-based Interactive Brokers is a top-tier online brokerage, with global coverage in American, European and Asian-Pacific exchanges. It is the 16th-largest security broker in the U.S.
The financial giant provides broad market coverage in stocks, options, futures, currencies, bonds, mutual funds and cryptocurrencies. IB services institutional and individual clients in over 200 countries and territories. Their IBKR Lite product offers zero commissions on U.S.-listed stocks and ETFs, and clients can fund accounts in 25 currencies.
This is a deep-discount broker, boasting much lower U.S. margin rates than their competitors.
Highly Rated Broker
Interactive Brokers holds the second slot in the Finance-Investment Bank/Brokers industry group and is highly rated in Barron's, IBD's sister publication. The group is ranked 37th out of the 197 IBD industry groups, moving up from the 60th spot just four weeks ago and 137th three months ago.
The CAN SLIM investing strategy looks to the top 40 industries to find leading growth stocks.
Interactive has a $31.2 billion market cap, smaller than behemoth competitor Schwab at $128.8 billion.
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Financial Stock In A Base
IBKR stock has been building a choppy right side of a 43-week cup base since May. Shares are within 10% of a 82.93 buy point, which coincides with a 52-week high. The financial stock jumped 6.9% in heavy volume Wednesday, following Tuesday's post-market earnings report.
Shares are holding well above support at their 50-day moving average. The relative strength line just reached a 52-week high, as indicated by the blue dot on the MarketSmith weekly chart. The line compares the stock's performance with that of the S&P 500 index.
Interactive's high 95 Relative Strength Rating means it has outperformed 95% of the stocks in the IBD database.
Stock Boosted By Q3 Earnings
Interactive Brokers beat Q3 2022 earnings and sales after Tuesday's close, reporting $1.08 per share vs. 98-cent expectations. 38% EPS growth surged past the March quarter's meager 2% growth.
Quarterly net interest income soared 73% year over year, with executives crediting higher interest rates and customer credit balances, partially offset by a decline in margin lending balances.
The 66% pretax profit margin marked an improvement over the 50% reported in the prior year. Customer accounts increased 31% to 1.5 million.
Analysts project 16% annual EPS growth in 2022 and 34% in 2023.
Financial Stock Fundamentals Strengthen
Interactive passes all the criteria on the IBD checklist screen, with a 97 Composite Rating and 91 EPS Rating. Adverse year-over-year comparisons weighed down earnings-per-share rankings.
Quarterly sales grew 114% year over year. The 15% return on equity (ROE) is below the 17% minimum in the CAN SLIM strategy. ROE is a measure of profitability and financial efficiency.
IBKR stock holds an top-notch A SMR Rating, which is a combination of three gauges: sales growth, profit margins and ROE. The rating goes from A to E, with A being the best and E the lowest.
Institutions Positive On Earnings Report
Finally, Goldman Sachs raised its price target to 89 and maintained its buy rating on the financial stock following this week's release.
At the same time. Barclays boosted its price target to 94 and maintained its overweight rating.
