Why the HUB24 (ASX:HUB) share price is rocketing to a record high

It’s been another good day for HUB24 shares…

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These three ASX mining shares rocketed by more than 20% today

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The HUB24 Ltd (ASX: HUB) share price is rocketing higher on Wednesday.

At the time of writing, the investment platform provider’s shares are up 12% to a record high of $31.22.

This means the HUB24 share price is now up 44% since the start of the year.

Why is the HUB24 share price rocketing higher?

Today’s gain by the HUB24 share price appears to have been driven by a positive response to its full year results by brokers.

In case you missed it, on Tuesday HUB24 reported a 34.4% increase in revenue to $110 million, a 47% lift in EBITDA to $58.6 million, and a net profit after tax of $9.8 million.

This was driven partly by a 141% increase in platform FUA to $41.4 billion.

What was the response?

The team at Goldman Sachs responded positively to the result. This is despite HUB24 falling short of its earnings expectations.

Goldman said: “While FY21 underlying NPAT of A$15.0m was 18% below our estimate (A$18.2m), we saw the c.3% miss at the underlying EBITDA line as more representative of the core operational trend (with the bulk of the delta to our headline estimate explained by higher tax, share based payments and D&A). Nonetheless as a result of the headline miss the final DPS of A5.5c (fully franked) was below our A7.2c estimate representing an FY21 payout ratio of 46%.”

In response, Goldman retained its buy rating and lifted its price target on the company’s shares to $29.81.

What else did the broker say?

Goldman was pleased to see the introduction of HUB24’s guidance for FY 2023. And while it notes that the company’s guidance was largely in line with its own expectations, it was notably ahead of the consensus.

The broker said: “Looking ahead, HUB introduced platform FUA guidance to FY23 of A$63-$70bn, noting that at Aug-21, platform FUA of A$44.2bn has already reached prior FY22 guidance for A$43-$49bn. HUB note the guidance does not rely on any large one-offs or a big contribution from the new IFL whitelable agreement. Prior to this morning our FY23 estimate of A$65bn was consistent with the new range, though we note Visible Alpha Consensus Data at just A$55bn suggests scope for meaningful upgrades, and we have since moved our assumption up to A$69bn.”

“On balance, with risks to flows/FUA still clearly to the upside we expect HUB’s near term margin/earnings growth trajectory to remain robust even with the elevated investment over FY22. While the 2H21 result was soft relative to our estimates, on account of higher FUA and platform revenue margin assumptions our earnings are largely unchanged, with our FY22/FY23 adjusted EPS down 2.3%/0.4% respectively (and we introduce FY24 estimates).”

Can the HUB24 share price go higher?

Unfortunately, the HUB24 share price has quickly surpassed Goldman’s price target. This appears to indicate that its shares are fully valued now.

And while Morgans has upgraded its shares to an add rating with a $31.65 price target, this is only a fraction ahead of where the HUB24 share price trades now.

Should you invest $1,000 in HUB24 right now?

Before you consider HUB24, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and HUB24 wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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