Morgan Stanley has stepped back from a bullish stance on flatexDEGIRO AG, lowering its rating to "equal-weight" from "overweight" and cutting the firm's 12-month price objective to €25.50 from €45 - a reduction of 43% - while removing the German online brokerage from its top-pick roster.
The change reflects a slowdown in customer expansion. Management reported customer growth of roughly 9% year-on-year in October, short of the company's stated ambition of at least 10% annual growth for 2026. Morgan Stanley now models customer growth of about 9.5% for the year and notes that a markedly stronger November and December would be required for the company to reach its original target.
Alongside softer customer take-up, the bank highlighted a deterioration in customer acquisition economics. For the first nine months of 2026, acquisition costs averaged approximately €126, versus €73 in the prior year. Morgan Stanley acknowledged some sequential improvement, with acquisition costs falling to around €88 in the third quarter from €139 in the first half, but observed they remain meaningfully above the roughly €60 recorded in the same period last year.
Looking ahead, the broker expects acquisition costs to remain structurally elevated at roughly €120-122 as flatexDEGIRO invests to reaccelerate growth.
Morgan Stanley pointed to intensifying competition in Germany, driven in part by pension reforms that are shifting competitive emphasis away from one-off transaction fees toward savings vehicles, cash returns and retirement-oriented offerings. The bank also said that expansion in markets such as Spain, France and Italy will demand additional outlays on localised product suites, distribution networks, customer service and marketing, which raises the risk that higher spending will take time to produce commensurate returns.
As a result of these dynamics, Morgan Stanley trimmed its earnings forecasts for 2026-28 by 4-6%, reflecting weaker commission income, slower customer growth and increased investment needs.
The note also flagged governance and management developments as complicating execution. The broker cited recent board departures, supervisory board vacancies and the adoption of a dual-CEO structure as factors that cloud strategic clarity and could weigh on implementation.
Nevertheless, Morgan Stanley still sees supportive structural trends. It cited rising retail investment participation across Europe, flatexDEGIRO's existing pan-European customer base and the potential for operating leverage as underpinning its view that adjusted net income could still grow in the mid-teens over 2026-28.
Market reaction has been pronounced: shares of flatexDEGIRO have fallen about 35% over the past three months, compared with a 12% decline among global peers, and the stock closed at €22.94 on November 9.
What Morgan Stanley now expects:
- Customer growth of roughly 9.5% for the year, implying a need for a strong year-end to hit prior targets.
- Structural customer acquisition costs near €120-122 as the company pursues growth investments.
- 2026-28 earnings reduced by 4-6% versus prior forecasts, driven by lower commissions, slower customer gains and higher investment spending.
Context and balance: While the downgrade and target cut reflect nearer-term headwinds to growth and profitability, Morgan Stanley retains a view that secular increases in retail investment activity and flatexDEGIRO's scale in Europe provide structural support and the potential for operating leverage if the firm can stabilise growth and manage its elevated investment cadence.