Analysts believe that as the regulatory environment in places like Hong Kong becomes clearer, Futu is expected to capture a significant share of the rapidly growing cryptocurrency trading market.
Written by: Bao Yilong, Wall Street Insights
Morgan Stanley has upgraded Futu Holdings' rating, believing that its cryptocurrency business is likely to become a growth engine for the coming years.
According to news from the Wind Trading Desk, on July 9, Morgan Stanley published a research report predicting that Futu will achieve an average annual profit growth of 27% from 2025 to 2027, due to the strong potential of its cryptocurrency business in the Hong Kong, Singapore, and U.S. markets.
Analysts believe that as the regulatory environment in places like Hong Kong becomes clearer, Futu, with its strong brand trust, one-stop service platform, and comprehensive licensing advantages, is expected to occupy an important share of the rapidly growing cryptocurrency trading market. However, potential risks include the high volatility of the cryptocurrency market and regulatory uncertainties. Nevertheless, Futu is expected to stand out in the competition due to its brand trust and full licensing advantages.
In a baseline scenario, if crypto assets can grow to 12% of total client assets by 2027, spot trading alone could bring Futu an incremental revenue of HKD 3.4 billion, which is an 18% increase from the previous revenue forecast for 2027. Additionally, businesses such as stablecoins, derivatives, and margin financing could contribute another HKD 1.6 billion in revenue.
Morgan Stanley noted that Futu's current forward P/E ratio is about 15 times, slightly higher than the average forward P/E ratio of 14.3 times over the past four years. However, analysts believe the stock is still undervalued, expecting the forward P/E ratio to reach 20 times by 2026, and have raised the price target from USD 140 to USD 160. In comparison, the forward P/E ratio for U.S. retail broker Robinhood is 63 times for 2026, indicating that Futu's valuation is attractive.
The Rise of the Cryptocurrency Market: Strategic Opportunities for Futu
The research report points out that the global cryptocurrency market is experiencing significant growth. The market capitalization has increased from less than USD 2 trillion at the beginning of 2024 to USD 3.9 trillion by the end of 2024, currently stabilizing around USD 3.4 trillion.
This scale is comparable to major stock markets such as Japan's stock market (USD 6.5 trillion), Hong Kong's stock market (USD 4.1 trillion), and the UK's stock market (USD 4.6 trillion).
Regulatory developments have become a key factor driving market growth. The U.S. Securities and Exchange Commission approved the first spot Bitcoin ETF in January 2024, triggering nearly a 50% market increase in the first quarter. In the fourth quarter of 2024, the market rose again by 32% with expectations of a more crypto-friendly regulatory stance from the Trump administration.
In February 2025, the Hong Kong Securities and Futures Commission released a comprehensive regulatory roadmap named "A-S-P-I-Re," covering 12 key initiatives including cryptocurrency brokerage, virtual asset trading platforms (VATP), and stablecoins.
Hong Kong's regulations pave the way for traditional financial institutions to participate in the crypto market. Futu obtained its Hong Kong brokerage license in the second half of 2024 and received its VATP license in January 2025, becoming one of the first regulated financial companies to enter the market.
Analysts believe this opens up significant market share potential for Futu, especially in Hong Kong and Singapore, where client assets account for over 60%. It is expected that more business types, such as derivatives, margin trading, and over-the-counter trading, will gradually be introduced in the future, further expanding the potential market space for financial institutions.
Futu's Core Competitive Advantages: Brand and Platform
Futu has built a strong customer base and brand trust in Hong Kong and Singapore, with 2.4 million active accounts and client assets reaching HKD 743 billion by the end of 2024, increasing to HKD 829 billion in the first quarter of 2025.
The research report indicates that Futu's full suite of licenses (including brokerage, exchange, and banking-related licenses) and top-notch user experience enable it to attract cryptocurrency investors through investor education and competitive pricing.
Futu's one-stop platform integrates trading across various asset classes, including stocks, ETFs, options, and cryptocurrencies, lowering the entry barrier for novice investors. For example, Hong Kong clients can trade Bitcoin directly using HKD or USD, with a minimum transaction amount of only about USD 30.
This convenience and trust serve as Futu's competitive moat, especially when facing competition from local brokers and global crypto exchanges. Morgan Stanley expects that if cryptocurrency assets account for 12% of Futu's client assets, spot trading will contribute HKD 3.4 billion in incremental revenue by 2027, equivalent to an 18% increase from the previous revenue forecast for 2027.
Additionally, the high trading speed of cryptocurrencies is a key driving factor. Calculating trading speed based on the ratio of trading volume to average market capitalization, the trading speeds of Bitcoin and Ethereum globally are 410% and 780%, respectively, far exceeding the 130-160% of the Hong Kong and U.S. stock markets.
If Hong Kong regulations allow, the issuance of stablecoins, derivatives trading, and margin financing could bring in another HKD 1.6 billion in revenue. For instance, the investment income from stablecoin reserves (assuming a 2.5% yield) could contribute HKD 240 million and hedge against the cyclical risks of the equity market.
Futu currently has low cryptocurrency trading fees (8 basis points in Hong Kong and 49 basis points in the U.S.), but the research report predicts that these may gradually approach the industry average (20-30 basis points) in the future, further enhancing revenue potential.
Risk Factors: Competitive Pressure and Short-Term Uncertainty
Despite the optimistic outlook, Futu's cryptocurrency strategy faces two major risks.
First, the inherent high volatility of the cryptocurrency market may lead to temporary declines in market capitalization and trading volume, affecting the linear performance of revenue growth.
For example, the collapse of FTX and UST in 2022 caused a significant drop in global cryptocurrency market capitalization and trading volume. Since launching its crypto business in August 2024, Futu's trading volume has also fluctuated with market trends.
Second, intensified competition from fintech companies, payment firms, and experienced crypto players (such as global exchanges) may impact customer stickiness and fee levels.
Three potential issuers in the Hong Kong Monetary Authority's stablecoin sandbox come from different backgrounds, indicating competitive diversity.
Morgan Stanley has raised Futu's profit forecasts for 2025-2027, with the net profit expectation for 2027 increased by 11.5% to HKD 11.233 billion, mainly benefiting from the revenue potential of crypto spot trading (approximately HKD 1.6 billion has been partially included in the baseline scenario) and the continued strength of the Hong Kong equity market.
The research report predicts that Futu's profit compound annual growth rate will reach 27% from 2025 to 2027, with client asset growth of 4-6%, and has raised the price target from USD 140 to USD 160 (based on a discounted cash flow model, with the baseline scenario accounting for 60% and the bull market scenario for 30%).
The current stock price of USD 130.53 corresponds to about a 15 times forward P/E ratio, lower than the expected growth rate, suggesting there is still room for upward movement. In comparison, the forward P/E ratio for U.S. retail broker Robinhood is 63 times for 2026, indicating that Futu's valuation is attractive.
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