Virtu Financial Ends 2020 on a Strong Note; Revenue Jumps Over 69%

Virtu Financial, the world’s largest retail market makers and liquidity providers, reported better-than-expected earnings in the fourth quarter, largely driven by heightened levels of volatility, bid-ask spreads and trading volumes across global markets and asset classes due to the COVID-19 pandemic.

Total revenues increased 69.3% to $676.7 million for this quarter compared to $399.6 million for the same period in 2019. Trading income, net, increased 121.0% to $505.5 million for this quarter, compared to $228.7 million for the same period in 2019.

The leading financial services firm said its net income totalled $197.7 million for this quarter, compared to a net loss of $29.4 million in the prior-year quarter, which included costs related to the ITG acquisition. Basic earnings per share for this quarter was $0.89 and diluted earnings per share was $0.88, compared to a basic and diluted loss per share of $0.16 for the same period in 2019.

“Virtu Financial (VIRT) reported 4Q20 adj EPS of $1.18, vs JEF/Cons est’s of $0.79. The strength in revenues (+$98M vs our est) essentially all flowed through to the bottom line. The company noted that 1Q21TD ANTI is tracking similar to FY2020 levels of $9.0M, which is approx. 50% above our current est. of $6.0M. 2021 expense guidance was reiterated and the buyback authorization was increased by an add’l $70M (post $50M of repurchases in 4Q20),” said Daniel T. Fannon, equity analyst at Jefferies.

Virtu’s product offerings allow clients to trade on hundreds of venues across 50+ countries and in multiple asset classes, including global equities, ETFs, foreign exchange, futures, fixed income and myriad other commodities.

However, Virtu shares, which surged over 57% in 2020 and have risen 15% since the beginning of the year, fell over 5% to $27.48 on Thursday.

Virtu Stock Price Forecast

Two analysts who offered stock ratings for Virtu in the last three months forecast the average price in 12 months $27.50 with a high forecast of $31.00 and a low forecast of $24.00.

The average price target represents a -0.07% decrease from the last price of $27.52. From two analysts, one rated “Buy”, none rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $24 with a high of $35 under a bull scenario and $8 under the worst-case scenario. The firm currently has an “Underweight” rating on the financial services firm’s stock.

Several other analysts have also recently commented on the stock. JP Morgan raised the target price to $31 from $27. UBS upped the target price to $26 from $25. Rosenblatt Securities upgraded raises to buy from neutral and raised the price target to $28 from $25. Citigroup upped the price target to $26 from $25.

Analyst Comments

“Elevated near-term market volatility and volumes boosting VIRT‘s near-term revenue base that’s strongly tied to volatility levels and volumes… but once the recovery begins and volatility normalizes VIRT‘s revenue is likely to decline sharply,” said Michael Cyprys, equity analyst at Morgan Stanley.

“Lack of visibility into a hard-to-predict revenue stream to weigh on the multiple. The business is driven by both volatility, volumes and retail flow, each of which are not directly in the company’s control. Organic growth initiatives to expand into new asset classes and geographies could offer new revenues pools, but limited visibility and still early stage.”

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