Liked By Facebook, Nasdaq Earnings Could Zip Stock To $27.50

Nasdaq OMX (NASDAQ:NDAQ) is scheduled to announce its first quarter earnings on Wednesday. Nasdaq reported revenues of $422 million in the fourth quarter of 2011, with consistent and strong results throughout the year. This quarter, however, we expect the results to dip slightly, primarily due to a decrease in trading activity across the U.S. and European markets fueled by uncertainty caused by the ongoing debt crisis. Nasdaq OMX is a global exchange company that provides trading, exchange technology, securities listing, and public company services. Its main competitors are CME Group (NASDAQ:CME), NYSE Euronext (NYSE:NYX), IntercontinentalExchange (NYSE:ICE) and CBOE Holdings (NASDAQ:CBOE).

See our full analysis of Nasdaq OMX.

Preferred Exchange for Technical Companies

Nasdaq has long been regarded as the favored stock exchange for technology companies and looks to further that reputation as Internet social networking giant, Facebook, is expected to list its shares on Nasdaq. Given that Facebook is expected to be the largest Internet IPO to date, this helps enhance Nasdaq’s brand image especially among technology firms. Increased listings from firms will boost trading revenues and will also lead to an increase in revenues generated from fees for Nasdaq. The U.S. Listings account for 6% of the Trefis price estimate for Nasdaq OMX.

Strong Share in U.S. Options Market

U.S. Derivatives trading is a major component of our valuation accounting for around 35% of our price estimate for Nasdaq’s stock. Derivatives trading has grown consistently over the past few years, and the initiatives taken by the company have helped it establish a strong share in the options market. The multiple platforms for trading as well as the advanced technology offered by Nasdaq, particularly the INET platform, give it an edge over competitors in derivatives trading. Derivatives trading revenues tend to increase in a volatile market, and we expect this to have a positive impact on Nasdaq’s market share.

Benefits from Decline in Dark Pool Trading

Regulations and concerns over the transparency of Dark Pool trading, wherein financial institutions are allowed to trade anonymously, are expected to have a positive impact on trading volumes of traditional exchanges such as NASDAQ.

For more insights on Dark Pool trading, please see U.S. Exchanges Benefit As Regulators Focus on Dark Pool Trading

We have a price estimate of near $27.50 on Nasdaq OMX’s stock, about 10% above the current market price.

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