Interactive Brokers Analyst Finds Stock Appealing Even After Recent Rally

Shares of Interactive Brokers Group, Inc IBKR have rallied over the past several weeks.

However, investors seem to be overestimating the company’s rate sensitivity, which has led the stock to underperform rate-sensitive peers over the past six months, ahead of the Federal Reserve’s rate cuts, according to Goldman Sachs.

The Interactive Brokers Analyst: James Yaro upgraded the rating for Interactive Brokers Group from Neutral to Buy, while raising the price target from $88 to $102.

The Interactive Brokers Group Thesis: The market is already discounting rate cuts, predicting a decline of 3%-16% in earnings from 2023 to 2025, Yaro said in the upgrade note.

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“However, we see substantial upside to these market-implied earnings,” the analyst wrote. “The company should be able to keep EPS flat, even in a deep downside earnings scenario with 10 rate cuts from 2023-25E (2 more than the market forward curve), as the company offsets rate cuts with strong balance sheet growth and mix shift, and commissions growth,” he added.

“Put another way, we see current valuation as offering an attractive entry point, with risk skewed to the upside,” Yaro further stated.

IBKR Price Action: Shares of Interactive Brokers were down 0.4% to $87.24 at the time of publication Tuesday.

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