CMC MARKETS PLC (CMCX) — Investment Research Note

Executive summary

CMC Markets is a UK-listed online trading and platform-technology business that serves retail and institutional clients across CFDs, spread bets, and stockbroking, and increasingly monetises its proprietary trading platform via B2B/API partnerships (Revolut, ASB Bank, Westpac). The operating trajectory across the period is one of stagnant/volatile earnings in FY2022–FY2024 followed by a step-change in FY2026/FY2027 as B2B partnerships scale into a largely fixed £280m cost base 2026-07-01 trading update; 2025-06-05 final results. The single most important point for valuation today is whether the July 2026 FY2027 guidance of "at least £550m" NOI and £250m EBITDA — a c.15–20% upgrade to prior — is durable, because on that number the shares trade around fair value after a >2x rally in 12 months.

Fair value estimate

• Fair value range: 620p – 830p per share (implied market cap £1,670m – £2,240m)
• Midpoint: ~725p / ~£1,955m
• Methodology: forward P/E on FY2027 management guidance. Guidance implies EBITDA £250m; deducting D&A (£15m), finance costs (£2m) and tax at ~28% gives PAT of c.£165–170m and EPS of c.60–62p on 269.7m shares. Applied 10–14x forward P/E to reflect the platform's high operating leverage but material earnings volatility and cyclicality of retail CFD flows.
• Current market cap £1,950m at 723p is inside the range, so the stock is broadly fairly valued at the midpoint.
• Absolute upside to mid: ~0% (range: –14% to +15%).

Sector context

• Confirmed classification: Financial Services (ICB) — online retail brokerage / trading platform.
• CMC's quality/leverage profile is above typical for the sub-sector: net cash balance sheet, investment-grade rating from Fitch (BBB-/F3, awarded H1 FY2026), fortress liquidity, and unusually strong operating leverage relative to peers who lack the same fixed-cost platform economics 2025-11-20 interim.
• Listed peers: IG Group (IGG.L), Plus500 (PLUS.L), and to a lesser extent Hargreaves Lansdown (now private) and Australia's Netwealth. CMC is smaller than IG, more diversified than Plus500, and unlike either has a genuine B2B platform-tech growth vector.

Investment thesis (3 bullets)

• Exceptional operating leverage on a fixed cost base. FY2027 guidance holds opex ex-variable-remuneration flat at ~£280m while NOI is now guided to at least £550m (vs £340m in FY2025). The Group states plainly: "operational gearing and delivering higher profit margins as income growth is delivered against a largely fixed cost base" 2026-07-01 trading update. Incremental revenue drops to EBITDA at very high margins.
• B2B API platform is the credible growth vector. Westpac (Australia's second-largest bank, launch ~12 months) is expected to lift domestic trading volumes ~45%; Revolut rollout live in 30+ European countries where CMC has no physical presence; further advanced-stage deals with a "major international bank" and Currys 2025-11-20 interim. This is a durable, capital-light, high-margin channel that reduces the historical volatility of CFD-only revenue.
• Balance-sheet fortress underpins the growth investment. CET1 £348.5m (Sep 2025), OFR ratio 221%, unencumbered liquid assets £314m, no bank debt, investment-grade rated, self-funded, dividend policy 50% of PAT 2025-11-20 interim; 2025-06-05 final. Downside protection is genuine.

Key risks (3 bullets)

• Retail CFD cyclicality and regulatory overhang. Historical NOI has swung between £252m (FY2020) and £410m (FY2021) as volatility and rules changed; ASIC-style interventions have hurt Australian retail before 2024-06-20 final; 2021-11-17 interim. Guidance beats can reverse quickly if market volatility drops.
• B2B revenue concentration and delivery risk. Westpac only launches in ~12 months; the ANZ Share Investing migration in Australia previously created transition friction; Revolut ramp is early. Miss on any of these damages the whole thesis 2025-11-20 interim.
• Web3/DeFi "third vertical" and StrikeX consolidation. Group has consolidated a majority stake in StrikeX (crypto blockchain infrastructure) after fully writing down the prior associate stake; the €300m Commercial Paper Programme funds this expansion. This is a capital-allocation risk if crypto/DeFi disappoints, and adds complexity investors did not previously underwrite 2025-11-20 interim; 2025-06-05 final.

Operating leverage

This is the strongest single fundamental attribute of CMC. Management explicitly guides FY2027 opex ex-variable remuneration at ~£280m against NOI of at least £550m, meaning the incremental contribution margin from B2B growth is close to variable-remuneration-only (i.e. very high). Illustratively: if FY2027 NOI comes in at £600m rather than £550m (a ~9% beat), and 80% of the £50m increment drops through, EBITDA would rise from £250m to £290m — a 16% profit uplift on 9% revenue upside; PBT could grow 20%+. The Group's own commentary — "operational gearing and delivering higher profit margins as income growth is delivered against a largely fixed cost base" — is the clearest statement of this dynamic 2026-07-01 trading update. Fixed vs. variable split observable in the filings: fixed staff costs, IT (£46m FY2025), premises, and legal/regulatory are largely non-scaling; only variable remuneration and partner commissions scale with revenue. HY2026 also shows the reverse dynamic: NOI +5% but PBT flat due to Australian remediation charge — confirming leverage cuts both ways 2025-11-20 interim.

Value-trap signals

None identified. Revenue is growing, dividend has grown from 7.4p (FY2023) to 11.4p (FY2025) to 13.8p (FY2026 total), balance sheet is net-cash, auditor's opinions are unqualified, no going-concern flags, no repeated guidance misses (recent record is beats), no meaningful related-party issues beyond a director loan (approved 89% by shareholders at 2026 AGM). Some minor governance friction visible in AGM votes (Sarah Ing 68% independent-shareholder support in 2026, down from 92% in 2025) but not thesis-breaking.

Earnings vs. expectations

• FY2025 (Jun 2025): Guidance range was £320–360m NOI; delivered £340.1m — met at midpoint. PBT £84.5m vs FY2024 £63.3m, a strong beat on cost management.
• HY2026 (Nov 2025): Delivered NOI +5% but simultaneously upgraded FY2026 NOI guidance by ~10% vs company-compiled consensus of £353.9m. Beat and raise.
• FY2027 (Jul 2026): Upgraded guidance from £460–480m to "at least £550m" NOI just 3 months into the year — a very large in-year raise. Material beat vs prior guidance.
• Pattern: Consistent beats and raises over the past 18 months, driven by exponential B2B momentum. This is a company currently beating its own expectations, though the 12+ months prior to that were more mixed (FY2024 profit warning implied by Aug 2023 update reducing FY2024 range).

Conviction

4 — high.

• Anchors: clean audited financials with unqualified Deloitte opinion; explicit forward guidance for FY2027 with EBITDA £250m and opex disclosed; multiple valuation approaches (P/E, EV/EBITDA) converge to ~£1.9–2.1bn range.
• Caveats: the FY2027 guidance depends heavily on B2B ramp (particularly Westpac, still ~12 months from launch) and retail trading volatility; a wider fair-value range is warranted than for a pure subscription business.

Driver scoring

CMC is a weak fit for the AI-receiver strategy despite its operational strengths. It is a financial trading platform whose customers happen to include institutions — it does not benefit from AI infrastructure spending, has no proprietary AI-training data, and is not obviously positioned to capture agentic-AI-driven expansion. It scores well on operating leverage and balance sheet quality, but the primary strategy pillar (AI beneficiary) is absent.