Webull's Q1 Surge: Why Analysts Are Wrong to Sell This Digital Investment Giant

Webull's Q1 2025 earnings revealed a company on a collision course with its skeptics. While Wall Street analysts cling to a “sell” rating, the data tells a story of sustainable growth, margin miracles, and strategic moats that few rivals can match. This article dissects whether Webull's performance—driven by 17% user growth, a 52% jump in trading revenue, and a 24.4% operating margin—justifies its undervaluation or if bears are right to fear a looming correction.

The Q1 Story: Growth That's Hard to Dismiss

Webull's first quarter was a masterclass in execution. Registered users hit 24.1 million (+17% YoY), while funded accounts rose to 4.7 million (+10% YoY). The real fireworks, though, were in trading activity: Daily Average Revenue Trades (DARTs) surged 44% to 924,000, a metric that directly ties to order flow rebates and commission revenue.

But the most compelling narrative lies in revenue diversification:
- Equity/Option Rebates: $64.1M (+46% YoY)
- Handling Charge Income: $17.5M (+80% YoY)
- Premium Subscriptions: 40,000 users in seven weeks, managing $2B in assets

This mix reduces reliance on volatile trading volumes. Meanwhile, operating margins expanded 22 percentage points to 24.4%, thanks to disciplined cost management (expenses fell 2% despite rising user bases). Net income turned positive for the first time, hitting $12.9M—a $25.5M improvement from Q1 2024.

Valuation: A Discounted Titan or Overvalued Growth Story?

Analysts cite a “sell” rating, citing Webull's EV/EBITDA of 304.85x (as of June 2025) as evidence of overvaluation. But this metric is misleading without context:
- Industry Benchmark: The Software sector median is 13.97x, and Webull's 304.85x ranking places it in the 97th percentile of unattractiveness.
- But Wait: EV/EBITDA is skewed by EBITDA's denominator. Webull's $24.4M TTM EBITDA is dwarfed by its $7.4B EV because of $297.5M in cash and $12.6B in customer assets (up 45% YoY). A better gauge?

Let's look at price-to-sales (P/S):
- Webull's P/S is 5x, below its 2024 peak but still above traditional brokers like Charles Schwab (2.5x) and Wise (1.8x).
- Key Comparison: Robinhood trades at 16.5x EV/Revenue, yet its margins (38% EBITDA) lag Webull's 24.4% operating margin.

Why the “Sell” Rating Misses the Point

Analysts focus on short-term risks:
1. Regulatory Headwinds: Crypto expansion (planned for Q4 2025) faces SEC scrutiny.
2. Interest Rate Sensitivity: Lower rates reduce interest income from customer deposits.
3. Competition: Fintech giants like SoFi and Fidelity are encroaching on digital wealth management.

But here's why bulls have the upper hand:
- Partnerships as Moats: Webull's alliances with BlackRock (model portfolios) and Visa (bank transfer integrations) create sticky revenue streams. Its Premium subscription—$2B in assets in months—proves the power of recurring revenue.
- Global Play: With plans to launch in the Netherlands and crypto in select markets by year-end, Webull is capitalizing on $8 trillion in unbanked global retail assets (per World Bank).
- Margin Resilience: Even if trading volumes dip, Webull's 24.4% operating margin (vs. Robinhood's 38% EBITDA) suggests cost discipline can offset volatility.

The Contrarian Play: Buy the Dip, Hedge the Risks

Webull's stock dipped 4.5% post-earnings, creating an entry point at $10.50/share (June 2025). Here's how to bet on its future:
1. Buy on Weakness: The “sell” rating likely exaggerates near-term risks. Target $12–$15 by year-end, driven by crypto launches and Premium adoption.
2. Hedge with Puts: Protect against regulatory setbacks by buying puts (e.g., $9 strike) if volatility spikes.
3. Hold for the Long Game: Webull's user base and partnerships mirror the rise of Paytm (India) and Flutterwave (Africa)—fintechs that built monopolies in fragmented markets.

Final Verdict: Analysts Are Looking Back, Webull Is Looking Ahead

The “sell” rating assumes Webull's growth is a flash in the pan. But its margin expansion, recurring revenue streams, and global ambition paint a picture of a company primed to dominate the $200B digital wealth management market. While risks exist, they're already priced into the stock. For investors with a 3–5 year horizon, Webull's valuation gap is a gift—one that could turn skeptics into believers by 2026.

Investment Grade: ⭐⭐⭐⭐☆ (Buy with a 15% downside stop-loss)**