Why Intercontinental Exchange’s Stock Isn’t Going Anywhere Anytime Soon

Intercontinental Exchange’s stock (NYSE: ICE) has gained more than 40% since hitting a low of $67 on March 23, and we believe that the stock has will largely move sideways over the coming months. Our belief stems from the fact that the company’s stock is almost at the level it was on February 19 (which was the pre-coronavirus crisis market peak) and also at the beginning of the year. Our dashboard, ‘What Factors Drove 72% Change In Intercontinental Exchange Stock Between 2016 And Now?‘, provides the key numbers behind our thinking, and we explain more below.

Intercontinental Exchange’s revenues have grown roughly by 15% from 2016 to 2019, which translated into a 35% growth in Net Income. However, earnings growth, on a per-share basis, was a much higher 43%, partially driven by share buy-backs. Specifically, the company has invested about $3.6 billion in repurchases in the last three years, resulting in about 6% lower outstanding shares. At the same time, Intercontinental Exchange’s P/E ratio grew from about 22.4x at the end of 2016 to 26.8x at the end of 2019. Intercontinental Exchange’s P/E is slightly up to about 26.9 now, which is at the highest level seen over the recent years, leaving limited upside potential for the figure (and hence, for the stock).

How Is Coronavirus Impacting Intercontinental Exchange’s Stock?

Intercontinental Exchange (ICE) owns exchanges for financial and commodity markets. It drives more than 62% of its revenues from transaction and clearing services, which include derivatives, fixed income, cash equities, and equity options trading and derivatives clearing. Due to ongoing coronavirus pandemic and economic uncertainty, securities markets are witnessing high trading activity. This, in turn, means that the exchange would generate more revenue in terms of transaction and clearing fees – something that has kept the company’s stock largely level over recent months. And with these expectations already priced into the stock, there isn’t much upside to be had here.

Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus. Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. It complements our analyses of the Coronavirus outbreak’s impact on a diverse set of Intercontinental Exchange’s peers. The complete set of coronavirus impact and timing analyses is available here.

Intercontinental Exchange’s stock has marginally underperformed its peer NASDAQ since the beginning of 2020. We have analyzed the reason behind the movement in NASDAQ’s stock over recent years in a separate interactive dashboard.

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