Interactive Brokers: Initiating Coverage With a Narrow Moat Rating and $113 Fair Value Estimate

We are initiating coverage on Interactive Brokers with a fair value estimate of $113 per share and assign the company a Morningstar economic moat rating of narrow, Uncertainty Rating of High, and capital allocation rating of standard. Interactive Brokers is an online broker that facilitates the trading of both U.S. and international clients. The company offers a wide variety of products, including stocks, options, futures, foreign exchange, bonds, etc. While market-making was a significant revenue driver in the past, the company divested the business in 2017 due to high volatility and low returns. We believe Interactive Brokers is now well positioned to see revenue growth by focusing on a pure brokerage business.