Major Bank Report | JPMorgan significantly cuts Futu's U.S. stock target price to $87, downgrades rating

JPMorgan significantly cuts Futu (FUTU)'s U.S. stock target price from $300 down to $87, downgrading the rating from "Overweight" to "Neutral."

JPMorgan's latest report states that regulatory authorities in China and Hong Kong have announced plans to rectify illegal activities in cross-border securities, futures, and fund businesses; Futu's mainland Chinese clients account for 13% of its total clients, and client asset management scale (AUM) accounts for less than 20%. If the company terminates all existing mainland client accounts, it is expected that its fiscal year 2026 revenue and earnings per share (EPS) will decrease by 20% and 30%, respectively.

The bank believes that the key uncertainties lie in the scale of "illegal gains" and whether the income from "illegal activities" can be recovered; until regulatory and enforcement details are clarified, EPS forecasts will not be adjusted for now. Nevertheless, it is estimated that the market will have a serious downside expectation regarding the situation, so the target price for Futu in December this year has been lowered to $87.

However, JPMorgan states that it remains optimistic about Futu's long-term fundamentals; although potential fines may cause a one-time impact on EPS in 2026, and the exit of mainland clients could reduce adjusted EPS by about 30%, the removal of regulatory shadows could ultimately lead to a revaluation, bringing Futu's P/E ratio closer to that of international peers like Robinhood (HOOD) and Interactive Brokers (IBKR) in the long run.