2 FTSE 250 online trading stocks I’m watching for 2022

With greater market volatility and people spending more time at home during the pandemic, online trading stocks have been buoyant – can this trend continue and should I buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

During the pandemic, markets became increasingly volatile as Covid-19 took its toll on many different industries. As trading activity grew, online trading stocks benefited from greater commissions. Two of these stocks have posted outstanding results. But can this continue and should I buy? Let’s take a look. 

Plus500

There are two online trading stocks that catch my eye when looking at the FTSE 250. The first, Plus500 (LSE: PLUS), is an Israel-based trading company specialising in Contracts for Difference (CFDs). This platform enables trading of CFDs on more than 2,200 underlying assets. It also has a presence in 50 countries. During the pandemic, it registered impressive results. In the year to the end of December 2020, revenue increased by 146%. This was significantly higher than previous results. Furthermore, these numbers far surpassed expectations. This resulted in a dividend yield that year of 7% and a share buyback scheme that targeted $25m worth of shares. With a price-to-earnings (P/E) ratio of 5.8, this stock has significant upside potential and may be considered a value stock. 

Its financial results took a turn for the worse in summer 2021 when the wider market stabilised. The market volatility that had boosted Plus500 had decreased as much of the world was released from pandemic lockdowns. And the share price dropped after it released weaker results

In Q3, the share price fell 12.8% from 1,470p to 1,282p. Yet that fall came in response to revenue dropping by only 2%. Such bearish sentiment after this revenue hiccup leads me to believe that expectations for Plus500 are too high. Nonetheless, I would be concerned with the prospect of lower market volatility in the future, despite my generally positive view of the firm. 

CMC Markets

In a similar vein, CMC Markets (LSE: CMCX) performed well over the course of the pandemic. The UK-based online trading platform specialises in CFDs and spread-betting. Its full-year to March 2021 saw pre-tax profit up 127%. Furthermore, earnings per share (EPS) were up 104%. Like Plus500, CMC Markets benefited from increased market volatility. With a P/E ratio of just 7.9, I’d be forgiven for seeing this stock as a bargain at its current share price.

Yet as markets became more subdued last year, news coming from CMC Markets was less encouraging. In September 2021, the company even issued a profit warning. Its income guidance for 2022 was cut significantly. The company had originally forecast income of £330m. But this was reduced to £280m and reflected the change in market conditions as we began to emerge from the pandemic.

CMC Markets also confirmed in November 2021 that it may split its leveraged and non-leveraged segments. The split would divide its investment platform from the CFDs, the latter usually generating more revenue when market volatility is greater.

Overall, both Plus500 and CMC Markets are strong companies and have performed well in recent times. Yet I will be buying neither for 2022 at current prices because I still think expectations are artificially high due to their past performances during the pandemic. However, I may buy shares in these two businesses if expectations fall, because I would expect the share price to follow suit.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Why I’d start buying shares with £250 today not £20,000 in future!

Is it worth waiting to start buying shares until one has more money to invest? Our writer doesn't think so…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

I’ve bought Diageo shares to boost my long-term passive income!

I plan to hold on to my Diageo shares well into retirement. Here's why I think it's a top stock…

Read more »

New virtual money concept, Gold Bitcoins
Investing Articles

Down 61%, are Argo Blockchain shares worth buying?

Argo Blockchain shares have tumbled in value. As a shareholder, Christopher Ruane considers what might come next for the business…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 UK dividend stocks with yields over 10%

These dividend stocks are the highest yielders on the UK market, says Roland Head. But how safe are these generous…

Read more »

Couple relaxing on a beach in front of a sunset
Investing Articles

I’d start buying shares for passive income with this pair

Our writer is looking to earn passive income via investing, and here are two leading stocks he might buy.

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Here’s the Shell dividend forecast through to 2024

The Shell dividend is still nearly 50% below 2019 levels. Will the oil giant use record profits to rebuild its…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

3 FTSE 100 stocks I think Warren Buffett might love!

Warren Buffett made his fortune thanks to the success of US shares. But here are three FTSE 100 stocks I…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Down 75%, has the Deliveroo share price bottomed?

The last 12 months have been torrid for the Deliveroo share price. But does this open an opportunity to grab…

Read more »