CMC Markets posts record revenues …and its shares trade down 2%
The stock market is a very fickle beast.
Earlier today London’s CMC Markets, one of the largest UK based online brokerages, gave a trading update for the recently closed fiscal 1H-2021 (CMC has a March 31 fiscal year end, so that covers April thru September 2020). The update pointed out that CMC’s CFD revenue will come in at about £200 million for the six month period.
To give some perspective, historically CFD revenue has typically been about 80-85% of CMC’s overall revenue. And CMC’s best ever six month total revenue result was 2H-2020, at £149.7 million. Which itself was a big leap over the previous best-ever result of just over £100 million.
Adding in CMC’s stockbroking revenue for the period of about £26 million – also an all-time best – we estimate that CMC’s total revenues for 1H-2021 will come in at about £230 million when all is said and done.
Point being, that the just-finished six month period was CMC’s best ever, by a wide margin. We’ll get the full details including profitability when the company posts results in mid November.
However, we received a few inbound calls this morning wondering why CMC shares (LON:CMCX) have reacted as they have – trading down between 2-3% this morning.
The reason, we believe, is quite simple – expectations.
Not that CMC didn’t meet them. Quite the opposite. But the stock market was clearly betting on a “blowout” set of results, with CMC shares trading up by about 15% in the past week leading up to the trading update. It looks like the maxim of buy on rumor, sell on news, has held firm again this time.
CMC Markets share price, past month of trading. Source: Google Finance.
Interestingly, CMC made no mention of the FCA’s pronouncement from Tuesday of this week that it is planning to ban crypto CFD trading, which has become a staple at some Retail FX brokers. We imagine that CMC declined to mention anything about the ban because either a) their results and the text was already ready before the FCA dropped its bombshell less than 48 hours prior, or b) it isn’t going to have a material impact on CMC. Or both.
Our take on the matter is that some of the “older” established UK-centric online trading firms such as IG Group, CMC Markets, and the just-acquired ETX Capital will indeed not be materially affected, with crypto CFD trading making up less than 1% of revenues. However some other, smaller firms or those which have been pushing crypto CFDs recently are likely to be hit harder.