Strategic diversification pays off for spread betting platform CMC Markets

Lea Hogg 2 months ago
Strategic diversification pays off for spread betting platform CMC Markets

Shares of CMC Markets experienced a substantial surge, reaching up to 25 percent, on the news of the company’s recent upward revision of its annual profit forecast. This noteworthy development can be attributed to a discernible escalation in market volatility, signalling an upward shift in trading conditions.

The spread betting platform, founded by prominent Conservative party donor Lord Peter Cruddas, (in photo above), identified a pronounced “improvement in market conditions” coupled with heightened demand from both retail investors and institutions, resulting in a substantial upswing in trading activity.

Optimistic outlook and enhanced profit forecast

CMC Markets is now anticipating a net operating income ranging between £290 million and £310 million for the full year, marking a notable increase from the initial projection of £250 million to £280 million. David Fineberg, CMC’s deputy CEO, said that the positive impact of improved retail investor confidence, particularly in response to global equity markets surging towards the conclusion of 2023. This surge followed robust economic data from the United States, creating a scenario conducive to potential interest rate cuts. Fineberg highlighted the resurgence of clients re-entering equities, indices, and precious metals like gold bullion, contributing to the platform’s enhanced financial performance.

Diversification and investor confidence

Albert Soleiman, the Chief Financial Officer of CMC Markets, underscored the pivotal role played by the company’s strategic diversification as it began to shine through during the third quarter. Despite reporting an interim loss before tax of £2 million in November, the platform has rebounded impressively, showcasing the positive influence of strategic decisions. The market responded positively to this strategic resilience, with CMC shares rising by 24 percent to 136.45p during mid-morning trading in London. Despite the impressive recent gains, the company’s valuation remains below its peak during the retail trading frenzy of April 2021.

In a broader industry context, Peel Hunt upgraded CMC Markets to a ‘buy’ rating, acknowledging the realization of benefits from prior investments and highlighting the platform’s comparatively low valuation. This positive sentiment aligns with similar successes seen by rivals, such as Plus500, which reported full-year revenues surpassing expectations.

The FTSE-250 listed company distributed approximately US$ 350 million to shareholders through buybacks and dividends, showcasing operational resilience and confidence in its outlook. Analysts at Jefferies foresee a favourable operating environment for Plus500 in 2024, emphasizing the potential benefits of heightened volatility arising from foreseeable tradeable events, including elections and rate moves.

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