Interactive Brokers' Stock Surge Reflects Strong Growth Amid Cyclical Peaks

What happened

Interactive Brokers' stock popped 16.4% last month, driven by reported 32% year-over-year customer growth and record profit margins for 2025. This aligns with the company's recent momentum, including reaching 4.40 million customer accounts and $779.9 billion in customer equity by Q4 2025. However, the DeepValue report cautions that this performance is cyclical, tied to market volumes and interest rates, with pre-tax margins likely normalizing from peak 79% levels towards the low-70s. Key risks include net interest income sensitivity, which could trim $335 million per 100 bps rate cut, pressuring earnings as rates decline. Given the stock's 58% run-up over the past year and premium valuation at ~21x trailing EPS, near-term upside appears limited without evidence of sustained structural improvements beyond cyclical highs.

Implication

The stock surge highlights IBKR's operational execution but underscores elevated expectations embedded in its premium multiple; the base case implies only mid-single-digit returns from current levels, with downside risk if trading activity normalizes or rates fall faster than expected. New initiatives like IBKR Desktop and ForecastEx offer growth optionality but are early-stage and add regulatory complexity without near-term revenue certainty. Continuous monitoring of monthly DARTs and margin balances is crucial to assess sustainability beyond cyclical peaks. With crowded sentiment and high dependence on interest rates, a prudent strategy is to wait for a pullback to the $65 attractive entry or for clearer evidence of durable margin retention before considering new positions.

Thesis delta

The new article reinforces the bullish narrative of strong customer growth and margins but does not shift the investment thesis, which maintains a WAIT rating due to IBKR's cyclical exposure and limited margin of safety at current prices. It highlights ongoing momentum but lacks evidence of structural change beyond the reported cyclical peaks, with filings indicating normalization risks. Investors should focus on upcoming quarterly reports and monthly metrics to confirm if growth and margins can be sustained amid potential headwinds like rate cuts.