Key Takeaways From NASDAQ’s Q4

February 1st, 2018 by Trefis Team
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After an impressive performance through the first three quarters of 2017, NASDAQ (NASDAQ:NDAQ) continued its strong performance in the fourth quarter, with revenue of $635 million up 6% over the same period last year to end the year on a high note. The company’s focus on growing its non-trading lines of business has helped it perform strongly despite a somewhat less volatile period leading to low trading volume. The rise in non-trading business segments – including Corporate Services, Market Technology and Information Services – is attributable to both organic growth as well as acquisitions. The Market Services segment saw revenue growth primarily due to acquisitions, and otherwise would have seen a decline driven by unfavorable trading conditions. The company’s operating margins improved by nearly 3 percentage points, primarily due to non-trading business margin expansion.

We have a $92 price estimate for NASDAQ’s stock, which is significantly ahead of the current market price. We expect nearly 7% growth in the company’s overall revenue for the year 2018. We have created an interactive dashboard where you can change the company’s forecast revenue, margins, and other key drivers to gauge how they would impact its expected results and valuation.

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Non-Trading Businesses Continued Growth Due To Acquisitions, Proprietary Products

NASDAQ’s non-trading business lines generate over 65% of the company’s overall revenues. These businesses grew by over 9% in the fourth quarter. The growth in the Information Services segment was supported by the increased adoption of its in-house products such as IR Insight and Influencer. The Market Technology segment grew organically due to increased uptake of software licensing and support, surveillance, and advisory. Increased demand for data and technology-related products and services is likely to sustain the growth momentum for these segments.

Market Services Has Grown Due To Acquisitions

The company generates about 35% of its revenue from Market Services, and the segment has grown marginally year on year. The growth due to acquisitions was partially offset by the decline in trading volumes resulting from unfavorable economic conditions and increased competition. The equity options volumes picked up pace following the acquisition of ISE, which gave NASDAQ a 42% market share in the U.S. equity options market. However, a decline in revenue per contract, driven by stiff competition, offset the overall revenue growth. Cash equities and fixed income revenue saw partial growth due to the positive impact of foreign exchange rates on European trading.

Please refer to the full Trefis analysis for Nasdaq

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