Is Interactive Brokers Stock a Millionaire Maker?

Core Viewpoint - Interactive Brokers is emerging as a significant player in the brokerage space, showing substantial growth in revenue and earnings, and presenting potential long-term investment opportunities despite its recent stock price surge [2][3][16]. Company Overview - Interactive Brokers has transitioned from a market-making company to a global retail brokerage platform, initially serving wealthy traders and institutional firms, and now offering commission-free trading to a broader audience through IBKR Lite accounts [4]. - The platform provides access to a wide range of tradable assets across 200 countries, making it appealing for international investors seeking to trade U.S. stocks [5][7]. Competitive Advantage - The company has grown its customer base from 200,000 accounts in 2015 to 3.9 million accounts, highlighting its competitive edge over traditional brokerages [6]. - Interactive Brokers offers a more extensive range of services compared to competitors like Robinhood, particularly for overseas investors, who face limitations with Robinhood's offerings [8][9]. Market Potential - With only 3.9 million customers compared to 26 million at Robinhood and 45.2 million at Charles Schwab, Interactive Brokers has significant room for growth in the brokerage market [11]. - The company aims for a global presence, targeting an addressable market in the hundreds of millions, with the potential to grow its customer base to over 10 million in the next decade [12]. Financial Performance - Interactive Brokers boasts impressive profit margins, with a 75% pretax profit margin, generating $1.1 billion in earnings on $1.4 billion in revenue last quarter [13]. - The company is positioned among the top business models globally, with the potential to generate over $10 billion in earnings as it continues to expand its customer base [14]. Investment Outlook - The stock has delivered a cumulative total return of 412% over the last five years, leading to a market cap exceeding $100 billion and a P/E ratio of 32.5 [16]. - Despite appearing expensive, the stock is considered undervalued for long-term investors, with the potential for significant customer base growth and corresponding revenue increases [17]. - Future projections suggest that the company could surpass $10 billion in annual net income, which would improve its valuation metrics [18].