J.P. Morgan has upgraded Virtu Financial Inc. to "neutral" from "underweight," writing that the company is poised to see greater trade profitability in an environment where volatility is high and trading volume is on the rise.
J.P. Morgan noted that market conditions have improved for Virtu Financial over the last two months with volatility rebounding across asset classes including equity, foreign exchange, oil and gold. Institutional and retail volumes are rising, the analysts wrote.
J.P. Morgan also expects Virtu Financial to hold the line on compensation and expenses in connection with its acquisition of KCG Holdings Inc.
"While KCG compensation was variable, we see Virtu as having migrated its businesses to more of a fixed cost approach, giving it more operating leverage particularly in stronger markets," the analysts said.
J.P. Morgan raised its price target for Virtu Financial to $20 from $17.50 on increased earnings from increased volumes and volatility and on lower taxes. It maintained its EPS estimate at 49 cents for 2017. It changed its EPS estimates to $1.30 from $1.11 for 2018 and to $1.60 from $1.43 for 2019.
