Swissquote Group Holding

We have left our 2023 EPS estimates unchanged as an increase in net interest income reflecting higher 3-month rates on the liquidity portfolio’s currencies has been offset by lower trading income, lower eforex income and higher costs, reflecting the increased headcount and higher wage inflation.

We have however revised up our 2024 EPS estimates as we now factor in a more volatile scenario for markets leading to an increased number of transactions and higher net fee and commission income (CHF226m vs CHF179m), as well as higher crypto asset income (CHF26m vs CHF15m) as we expect a combination of bitcoin halving (April 2024), potential US ETF approval and the first-rate cuts coming from central banks as early as in the Q2-24. This will be offset by a reduction in eforex income and the trading result, on the back of slower account growth as well as higher costs, linked to higher headcount and slightly increased wage inflation.

For 2025, we have left our 2025 EPS estimates unchanged as lower net interest income linked to lower 3-month rates on the liquidity portfolio, as well as lower trading income and lower eforex income linked to slower-than-anticipated account growth and higher operating expenses should be more than fully offset by higher net fee income linked to higher volatility levels and increased net crypto assets income on the back of the improved crypto market conditions and higher assets under custody.

Our change in target price on Swissquote reflects mostly the upgrade to our 2024 EPS estimate which has led to an increase in our 3-year average EBITDA estimate to which we apply a 10x multiple for our NAV valuation.

We continue to believe that Swissquote can thrive in any environment thanks to its business model where high rates act as a natural hedge to volatility and a trading activity decline.

Based on the assumption of sustainably high interest rates in 2024, higher market volatility compared to 2023 and a potential revival of the crypto market, we expect Swissquote to make good progress towards its 2025 guidance as soon as in 2024. This should be sustained in 2025 with still-higher volatility levels which should more than offset the higher costs and lower net interest income as we believe rates should decline amidst an overall softening in global monetary policy.

Our NAV is based on a 3-year average EV/EBITDA multiple applied to Swissquote’s EBITDA estimates. With the 2024 upgrade, this leads to a rise in our 3-year average EBITDA to which we apply a conservative 10x multiple, leading to an improvement in our NAV valuation.