Valuation updated to reflect Q1 FY21 result. Notes:
Despite a modest QoQ revenue growth of 4.5% I think it is important to look at this figure Vs their underlying driver of revenue which is currently ASX trade frequency. As per page 3 of their update, ASX daily trades were down from ~1.8m to ~1.5m so it was always going to be a difficult quarter to grow revenues, however SelfWealth daily trades increased, helped by a 24% increase in active traders
Note that lowest Q3 & Q4 QoQ growth has been 41.8% and 37% respectively, not sure what has caused significantly higher growth historically in these quarters (apart from covid in most recent year, with 74% and 101% growth respectively) however I expect international trading and new apps to provide a similar boost.
Still expecting YoY revenue growth ~200%, growing gross margin and profitability, growing share of big market opportunity.
Some may think their user and trade volume growth has been elevated by a one off covid related boost, I disagree:
-they have grown revenue QoQ 13 quarters in a row.
-they are building momentum with early adopters,
-they have US trading and new iOS and android apps pending both within 3 months
-In Q1FY21 they grew trade volume and quantity despite these declining overall for the ASX i.e. they grew their market share ~30%
They are clearly listening to their users, who are growingly becoming investors in SelfWealth (can't get much stickier than that). As they gain market cap more investors will notice them, research them and make the decision to switch to a cheaper broker, I think their share market success could make great free product marketing.
Biggest risk is competition, I think the new app and US trading will assist in getting majority of new traders as well as being ASX listed, however they have no moat and are already being undercut with $8 trading offered by ThinkMarkets, so only time will tell. Will need to keep an eye on quarterly new traders, liking the 11,370 new traders added in Q1