Shore Capital upgrades CMC Markets to 'buy', hikes estimates
Broker Shore Capital lifted its recommendation on CMC Markets Plc to 'buy' from 'hold' on Thursday and upped its price target to 330p from 280p after the spread betting firm lifted its outlook for full-year net operating income following a better-than-expected first half.
CMC now expects net operating income to be about 10% ahead of current market expectations of £353.9m for FY2026.
Shore Capital said: "CMC has published interim results where the outlook is significantly better than we expected, whilst H2F is off to a strong start.
"Today's statement shows how the significant investment CMC has made over the past few years is now beginning to bear fruit in terms of earnings contribution, whilst showcasing CMC's impressive technological capabilities, which provide optionality for future growth."
Shore said it was making material upgrades to its forecast after the interims.
For FY2026, Shore now expects trading net revenue of £293.7m, up from an estimate of £254.8m previously. It lifted its forecast for total revenue to £388.7m from £355.3m and its forecast for adjusted pre-tax profit by 25% to £118.3m.
For FY2027, it lifted its estimate for trading net revenue by 17% to £310.8m and its forecast for total revenue by 11% to £412.3m. It now expects adjusted pre-tax profit of £126.9m, up from £101.m.
Shore said the share price performance over the past year has been disappointing, which is a reflection of delays in CMC's ability to monetise the significant investment it has made over the past few years and poor management of earnings expectations, which has resulted in an extended period of downgrades.
"As this investment finally begins to bear fruit, we model higher revenue, which drives material EPS and DPS upgrades. The B2B partnership pipeline suggests scope for further upside in our revenue forecasts, so we tentatively ask ourselves if CMC is once again in the foothills of an EPS upgrade cycle?
"On our revised forecasts, CMC trades on a 12m forward P/E of circa 6x with dividend yield more than 7%, making it the lowest rated of the UK-listed leveraged trading stocks."
At 1250 GMT, CMC shares were up 28% at 265.50p.
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