SIF Portfolio: Plus500 is riding high on cryptocurrency profits - what’s next?

Tuesday, Feb 20 2018 by
SIF Portfolio Plus500 is riding high on cryptocurrency profits  whatrsquos next

Is the cryptocurrency boom turning to bust? The chart below showing the value of Bitcoin since June last year suggests that it might be.

On the other hand, investors who have HODLed have seen the value of their coins rise by more than 85% since 5 February. Rivals Litecoin and Ether have also staged strong comebacks.

This rapid rebound means that anyone who bought Bitcoin as recently as October has already doubled their money. So the boom could still have further to go before it peters out, as I believe it will.



Stock market crypto-winners

Which stocks have profited from the cryptocurrency boom? Leaving aside the rash of dubious AIM firms that have climbed on the blockchain bandwagon to boost their share prices, CFD firms have been among the big winners.

One of the most notable of these is Israel-based Plus500. New customer numbers rose by 136% in 2017, helping to lift revenue by 33% and earnings per share by 72%:


Source: Plus500 Ltd 2017 preliminary results

It’s worth noting how profits rose twice as quickly as revenue. Much of the improvement in profit margins appears to have been driven by the fall in average user acquisition cost (AUAC), which dropped by 60% from $1,195 to $474.

I’d hazard a guess that much of this reduction was due retail customers seeking out the firm in order to start trading bitcoin and other cryptocurrencies. Although Plus500 says that “less than 15%” of revenue came from cryptocurrency trading last year, I suspect the resulting contribution to profit was much greater than this.

Should I buy this stock?

Plus500 was one of Ed Croft’s NAPS choices for 2018. For similar reasons, this marmite stock has now qualified for my Stock in Focus screen.

I have to admit that the thought of buying this stock makes me uncomfortable. Personally, I can’t see how a company which grows so quickly and generates so much surplus cash can be a good quality, sustainable business.

I remember when the firm’s founders were happy to sell at £4 per share. Today the price is £12, despite the threat of regulatory restrictions on leverage.

Plus500’s performance has so far defied expectations, perhaps in part due to a good…

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Plus500 Ltd is an Israel-based company that develops and operates an online trading platform for individual customers to trade contracts for difference (CFDs). Its online trading platform allows its customers to trade CFDs on over more than 2,200 different underlying global financial instruments comprising equities, indices, commodities, options, exchange-traded funds (ETFs), crypto currencies and foreign exchange. The Company enables individual customers to trade CFDs in more than 50 countries. The trading platform is accessible from various operating systems, such as Windows, iOS, Android, and Surface, as well as Web browsers. more »

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21 Comment on this Article show/hide all

JASPERTHEDOG 20th Feb '18 1 of 21

PLUS has taken two hits by regulators and come out of both smiling. I think the regulators have moved on to more pressing matters than trying to stop idiots from losing money. As part of a diverse portfolio, as in the case of my wife, PLUS is not only a star growth stock, but more importantly, a star income stock (We are both retired). I made a great deal of money from PLUS in the early days, and invested for my wife after the second swipe by the regulators, on the basis that lightening will not strike three times in the same place. PLUS is widening its international offerings, and more and more environments accept the model as reasonable.
I am no fan of cryptocurrencies, but I have no objection to making money from those who are.
As a company, PLUS has always either met or exceeded its forecasts, been open about its engagement with the powers that be and provided us with excellent returns.

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About Roland Head

Roland Head

I'm a private investor, analyst and writer on stock markets, with a particular fondness for free cash flow, dividends and value. My main interests are UK and US stocks. I also have an interest in (profitable) commodity stocks.  I have passed the CFA Level 1 exam and hold the CFA UK Investment Management Certificate (IMC). One of my investment interests is developing rules-based strategies such as my Stock in Focus portfolio. This reflects a significant part of my personal portfolio and is the subject of my weekly column here at Stockopedia. In earlier life, I worked as an engineer in telecoms and IT. The rules-based and quantitative approach required for this kind of work undoubtedly influenced my investing style.  I also learned a lot from seeing the tech bubble deflate in 2000-1, when I was working for a very large and now defunct Canadian telecoms firm.  more »


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