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Futu Holdings Limited (FUTU) Stock Price, News, Quote

The company reported earnings results but also faced headwinds that hurt many Chinese stocks.

what happened?

Shares in Futu Holdings (FUTU -1.38%) were down nearly 9% as of 12:30 p.m. ET after, a Hong Kong-based operator of an online brokerage and wealth management platform, announced its fourth-quarter results.

so what

Futu reported earnings per American Depositary Share of $0.42, down nearly 16% from the fourth quarter of 2020. Total revenue was $205.5 million, an increase of approximately 35% year over year. Although only one analyst on Yahoo! predicted FUTU's fourth-quarter earnings. Finance, whose profits and revenues fell well short of those estimates.

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Man looking at computer with negative stock chart.

The total number of paying customers on the platform increased 141% year over year to 1.24 million. Management expects to add a net 200,000 new paying customers by 2022. The total number of users reached 17.4 million, an increase of nearly 46%. Total client assets rose 75% to $54.7 billion.

Additionally, Futu announced the approval of a new American depositary share repurchase program worth up to $500 million by the end of 2023, funded from existing cash resources.

What should we do now

Although it missed expectations, FUTU has shown solid growth in 2021 and its share buyback program should please investors. In fact, FUTU shares surged in premarket trading on Friday.

However, green quickly turned red - possibly due to news that the SEC may delist five Chinese companies from U.S. stock exchanges for failing to hire acceptable auditors, which means it can inspect the U.S. their financial status not reported by regulators. The Foreign Corporations Holding Accountability Act, enacted in 2020, prohibits companies from trading on U.S. exchanges if audits for three consecutive years cannot be verified.

Futu was not among the companies named by the SEC this week. However, from what I've gathered, the stock is only listed on the Nasdaq, and investors are concerned that other Chinese companies may be delisted. Many Chinese stocks were lower Friday morning.

Futu had a solid quarter, but when you invest in Chinese companies, you need to be acutely aware of how regulatory and geopolitical issues can affect your business, which is why I generally rate these stocks cautiously.