The low volatility going on in the financial sector is bad for retail brokers as their revenues get down to the lows. For instance, Plus500 has some contributions to make regarding the fluctuations in revenue. According to what the company revealed to investors, their revenue tumbled to 82% during Q1. To say that the decline is shocking is an understatement.
Looking at this news cautiously, the first quarter for the company was contorted by the crash in the cryptocurrency markets. Many people with crypto wallet experienced massive losses. This 2018 crypto market crash resulted in deteriorating the FX market conditions. As such, the company’s first quarter results will not be impressive given that equities and other assets lost value. Although bonds remained stable, they are not the retail investor’s favorites.
The company’s report shows a sum of $53.9 million as its revenue in the first quarter. However, the beginning of this month hasn’t been showing favorable signs for the industry. FX is still at the lows not minding the difference in the United States economy as against others.
Plus500 stock reactions
The company’s stock listed in London fell as low as 44% as we saw on the news. It went on again to stabilize at 550 pence/share. Well, the figure is still representing a 24% low. Let’s recall that the lowest which the share saw was in 2017 when it fell as low as 400p/share.
When the company made comments about the decline in their stock, they tagged the reason as “extremely subdued financial markets” The CEO of Plus500-Asaf Elimelech made another statement about the market conditions. He related the fall to the low trading opportunities which customers experienced due to the global economic and political news.
Asaf continued to state that the company is still hanging in there and not to give up. Reason being that they have many things to achieve not minding the low revenue. Since there are changes in the market regulations, the company will focus on winning more customers and retaining them. Plus500 CEO continued to say that they will improve customer experience through high-quality service. According to him, they have put initiatives in place to expand their base.
Quarterly Revenue drops to 64% per client
Looking at the KPI of Plus500, the first quarter was not favorable for the company at all. Each client’s revenue on the average was as low as 64% to $550. Meanwhile, the average acquisition cost per client is $1,230 which shows only a 17% decline. Looking at the bright side of things, the company recorded an impressive number of new clients. They experienced a 10% increase in new clients a figure which stood at 21,306. This increase is notable because it is far better than in the fourth quarter.
Well, apart from the influx of new clients, the company also lost some number of existing clients. At least 4% to 97,921 of their active clients left.
Meanwhile, the shares of some publicly-traded brokers got some hits too. The CMC and IG Group markets dropped by 10% and later recovered to start trading at 3% lower.