What To Watch For In NASDAQ’s Q4 Earnings

January 30th, 2018 by Trefis Team
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NASDAQ (NASDAQ:NDAQ) has had a fairly strong 2017, as the exchange managed to grow its revenue by 7% in the first 9 months of the year, and we expect the growth momentum to continue when it announces its Q4 earnings on January 31. The revenues from non-trading segments grew at a rapid pace, aided by the acquisitions of Marketwired and Boardvantage in the previous year, as well as enhanced data and technology offerings. We forecast around 5% growth in NASDAQ’s non-trading revenues for the full year, and believe that the Q4 results will reflect similar growth.

 

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Non-trading businesses – which include information, technology and listing services, and account for over 60% of the company’s overall revenue – are likely to drive growth, with increased demand for data and technology-related products and services. In-house products such as IR Insights and Influencer have attracted a good number of customers since launch in 2016, and we expect increased adoption in the near term as well.

The Market Services segment, which contributes around 37% of NASDAQ’s overall revenues, grew by over 10% in the previous two quarters. The acquisition of ISE has secured NASDAQ the leading position in equity options trading. With around a 40% market share in the U.S., volumes increased by about 12% year over year in Q4. However, declining market shares in the cash equity and fixed income asset classes will likely offset the growth in trading commissions.  This is due to tough competition from exchanges such as IEX, and the fact that the company’s offerings remain limited to equity products.

We have a $92 price estimate for NASDAQ’s stock, which is significantly ahead of the current market price.

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