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CMC raises guidance on heightened volatility

The spread-betting specialist's announcement prompted analysts to upgrade profit forecasts
March 4, 2020

CMC Markets (CMCX) raised net operating income guidance for the 2020 financial year after recent market volatility induced by the coronavirus outbreak increased trading activity.

IC TIP: Hold at 176p

The announcement came less than a week after rival platform Plus500 (PLUS) revealed that the group’s financial performance during the quarter to date was ahead of the prior year, following a significant increase in levels of customer trading activity. 

CMC said the retention of client income so far this year continued to be higher than during the first half, which along with efforts to diversify revenue streams and grow the proportion of higher value clients would result in net operating income ahead of the £201m market consensus forecast. 

Following the European Securities and Markets Authority’s (ESMA) crackdown on retail traders’ use of leverage last year, management has focused on “tuna” (large volume trading), rather than “churn”, in the hope of also reducing revenue volatility. 

The update covering the first two months of the year is the fourth consecutive announcement of the spread-betting specialist outperforming market expectations. Since management did not guide towards any increase in costs, analysts at Peel Hunt opted to upgrade pre-tax profit forecasts by 30 per cent to around £75m.