British financial spreadbetting firm CMC Markets Plc (CMCX.L) warned net operating income for the first-half ended September would be lower than a year earlier as low levels of volatility resulted in fewer trading opportunities for its clients.
Shares in CMC Markets fell as much as 14 percent to 238.3 pence on Tuesday. The stock is poised for its worst fall in a day since listing on the London Stock Exchange in February.
Many investors are sitting on their positions rather than taking out new ones, or altering them significantly, as they wait for further guidance on how the UK economy might behave when divorce proceedings from the EU kick off in earnest.
"We find this announcement somewhat surprising as both IG Group (IGG.L) and Plus500 (PLUSP.L) have reported that recent trading has been very good," Numis analysts wrote in a note.
CMC, whose rivals include IG Group Plc, Denmark's Saxo Bank and FXCM Inc (FXCM.N), said it was confident of net operating income improving in the second half, helped by its larger funded client base, institutional offerings and product development.
The company, which was set up by Chief Executive Peter Cruddas as a foreign exchange broker with a 10,000 pounds ($13,381) investment in 1989, reiterated its target of the 220 million pounds in net operating income by 2020.
"We believe this high-growth recovery phase will eventually come to an end due to competition, further regulatory/compliance headwinds and increasing IT/marketing costs," Numis said.
CMC said the number of new clients rose 19 percent for the five months ended August, with client money balances rising 21 percent from a year earlier.
RBC Capital Markets said client money indicates their propensity to trade and is a positive indicator of future growth potential. However, low levels of volatility were hurting revenue per client, RBC said.
"CMC remains a coiled spring that awaits the return of market volatility," RBC said and kept their "outperform" rating on the stock.
The brokerage, however, reduced its guidance for the company by 10 percent throughout the "forecast horizon" and cut share price target to 320 pence from 335 pence.
The stock was the top percentage loser on the FTSE 250 Midcap Index .FTMC that was nearly flat on Wednesday morning.
($1 = 0.7473 pounds)
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Gopakumar Warrier)