NASDAQ Stock Has Limited Upside

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[Updated 01/10/2022] NASDAQ Stock Valuation Update

NASDAQ Stocks (NASDAQ:NDAQ) is up 47% since the end of 2020, and at its current price of $195 per share, it’s down about 9% from its fair value of $215 — Trefis estimates NASDAQ Valuation, While the exchange outperformed expectations down the road in its 2021 third-quarter results, its stock has lost 2% in value since then. Its cumulative nine-month net revenue (revenue less transaction-based expenses) grew 6% in 2021, primarily due to higher non-business revenue and lower transaction-based expenses. That said, there was a slight decrease in market services revenue (excluding transaction-based expenses) due to lower cash equity volumes. We expect the same trend to continue in the fourth quarter. Specifically, consensus estimates for fourth quarter 2021 revenue and earnings are $860 million and $1.74, respectively.

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The company’s top line (net revenue) grew 15% annually in 2020. This was due to strong growth in both trading and non-trading revenues. Trading volumes were higher than pre-Covid-19 levels in the first three quarters of 2021. As a result, the exchange’s cumulative nine-month trading revenue exceeded 2019 figures, but was slightly below 2020 levels. In addition, non-trading revenue increased 22% over the same period. we expect NASDAQ’s Revenue To touch $5.9 billion (net revenue of $3.4 billion) for the full year 2021. Additionally, the Company’s adjusted net income is expected to remain around last year’s level. This would result in an EPS of $6.09, which combined with a P/E multiplier of above 35x would result in a valuation of $215.

Below you’ll find our previous coverage of the NASDAQ stock where you can track our outlook over time.

[Updated 11/23/2021] NASDAQ stock is trading close to its fair value

NASDAQ Stocks (NASDAQ:NDAQ) has gained 56% YTD, and at its current price of $208 per share, that’s about 3% less than its fair value of $215 — Trefis estimates NASDAQ Valuation, The company recently released its third-quarter results, in which revenue and earnings exceeded consensus estimates. It reported net revenue (revenue less transaction-based expenses) of $838 million, up 17% from the year-ago period. This was primarily driven by lower transaction-based expenses on a year-over-year basis, followed by an increase in non-trading revenue. However, the company saw a 15% decline in market services revenue, primarily due to a 29% decrease in the cash equity trading sub-segment. Notably, average US matching equity volume decreased 14% year-over-year in Q3. Overall, the increase in net revenue translated to a 9% increase in adjusted net income to $288 million.

The company reported $5.6 billion in 2020 revenue, up 32% from the 2019 figure. This translated into net revenue of $2.9 billion – 15% annually. NDAQ benefited from higher trading volumes in the year due to the COVID-19 crisis, leading to a 21% increase in net market services revenue. This was followed by a 17% increase in the Investment Intelligence unit. In addition, net market services revenue for the cumulative nine months of 2021 increased 16% year-over-year due to lower transaction-based expenses. The same trend continued in the investment intelligence segment, with nine-month cumulative revenue up 20% year-on-year. Overall, we expect the same momentum to be followed in the fourth quarter. NASDAQ’s Revenue To touch $5.9 billion (net revenue of $3.4 billion) in FY2021. Additionally, the Company’s adjusted net income margin is expected to be around last year’s level. This would result in an EPS figure of approximately $6.09, which combined with a P/E multiplier of above 35x would result in a valuation of $215.

[Updated 05/27/2021] NASDAQ stock has limited room for growth

NASDAQ Stocks (NASDAQ:NDAQ), a global financial exchange group, gained about 25% — up from about $133 in early 2021 to about $165 currently, outperforming the S&P500, which gained 12% over the same period. increased by. The exchange’s top-line has benefited from higher US industry trading volumes in 2021, the main reason behind the favorable investor outlook towards the stock.

The jump in trading volume was driven by two main factors: first, the acceptance of a $1.9 trillion stimulus package. Second, the high level of participation from retail investors.

But is that all in the story?

Not enough, despite recent gains, traffic estimate NASDAQ Valuation Based on a prime opportunity and a risk factor — slightly above the current market price — should be around $170 per share.

The opportunities we see have a better trajectory for NASDAQ’s Revenue in subsequent quarters. The company’s revenue for the full year 2020 increased 32% yoy to $5.6 billion, with $2.9 billion in net revenue (revenue minus transaction discounts, brokerage, withdrawal and exchange fees) up 15% yoy. This was primarily driven by a 21% increase in net market services revenue due to higher trading volumes, followed by 17% growth in the Investment Intelligence segment.

The same trend continued in the first quarter of FY21, with the exchange posting better than expected results. NASDAQ reported revenue of $1.65 billion in the quarter — 22% more than the year-ago period. This translated into net revenue of $851 million — 21% year-over-year, driven primarily by a 22% increase in net market services revenue due to unusually high trading volume, with similar growth in the Investment Intelligence unit. together. Notably, the Market Services segment reported record quarterly trading volumes in US options and US equities in the quarter. That said, higher trading volumes are expected to normalize as economic conditions improve. But, until then, they are likely to dominate NDAQ’s quarterly results. Overall, we expect NDAQ’s revenue to reach $6.1 billion (net revenue of $3.3 billion).

Operating expenses are likely to see a slight increase in FY21, which is likely to partially offset the benefit of higher revenues. The company’s profitability figures for the year are likely to increase marginally — EPS will likely improve from $5.59 to $5.71. An EPS of $5.71, combined with a P/E multiplier of below 30x, would give a valuation of around $170.

Finally, how much should the market pay per dollar of NASDAQ earnings? Well, to earn close to $5.71 per year from a bank, you need to deposit about $571 into a savings account today, so about 100 times the desired income. At the NASDAQ’s current share price of around $165, we’re talking about a P/E multiplier of about 29x. And we think a figure slightly above 30x would be appropriate.

That said, a financial exchange is still a risky proposition, despite reporting growth in the past year. While there is potential for growth, a change in the current market sentiment could hurt the near-term outlook. What’s behind that?

The business model of NASDAQ is very sensitive to market volatility and trading volume. In addition, the recent jump in trading volume was due to significantly higher participation from retail investors. While retail investors have done well since 2020, they do not have much loss-making capacity. Any sudden correction in the course of the market could result in significant losses for them, put them out of business, and have a negative impact on trading volume. In summary, we believe the NASDAQ stock is undervalued and offers limited upside.

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