Berenberg upgrades Plus500 to 'buy'

The bank noted that after a sharp fall in December 2016 after the Financial Conduct Authority published proposed regulatory changes, Plus500 has been among the top performers in the diversified financials sector, rising 62% year-to-date.

"We believe that regulation is the key driver of the top line at Plus500, and, as it is hard to forecast, rarely positive, difficult to time and even harder to model in terms of its intended and unintended consequences for customers and competitive environment, the road ahead is unlikely to be smooth.

"However, we also believe that Plus500 has a business model that works, can adapt and is generating very strong levels of cash. As a result, we think there is an argument that these cash flows are being undervalued."

Berenberg pointed out that Plus500 has low working and fixed capital requirements, meaning that it has high returns on capital and can return a large amount of cash to shareholders via dividends or buybacks. The bank's forecast dividend implies a yield of around 9%, but this could turn out higher.

At 1007 BST, the shares were up 2.4% to 655.50p.