What’s Next For NASDAQ Stock After Almost Recovering To Its All-Time High Of $120?

by Trefis Team
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Trefis
NDAQ
Nasdaq OMX Group
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NASDAQ Inc. stock (NASDAQ: NDAQ) is up nearly 60% so far since hitting a low of $73 on March 23 to reach its current level around $115. But it looks like the stock now has limited upside potential. Why is that? The key is NASDAQ’s stock is around 8% ahead of the $107 figure seen at the beginning of 2020 and is also very close to the all-time high of $120 it reached in late February. Our dashboard, ‘What Factors Drove 56% Change In NASDAQ Stock Between 2017 And Now?‘, provides the key numbers behind our thinking, and we explain more below.

Some of the 56% rise in Nasdaq’s share price over the last two years is justified by the roughly 8% growth seen in NASDAQ’s revenues from 2017 to 2019, which translated into similar growth in Net Income. Consequently, earnings per share grew 7% driven. Finally, NASDAQ’s P/E ratio grew from about 16.8 at the end of 2017 to over 22.7 at the end of 2019. While NASDAQ’s P/E is slightly up to about 24.5 now due to the positive impact of higher trading volumes on NASDAQ’s top line, we believe that the potential gains are already priced into the stock.

How Is Coronavirus Impacting NASDAQ’s Stock?

NASDAQ is a holding company that engages in trading, clearing, exchange technology, regulatory, securities listing, information, and public & private company services. It derives more than 62% of its revenues from market services, which include Equity Derivative Trading and Clearing, Cash Equity Trading, FICC, and Trade Management Services businesses. Due to the 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 clearing and transaction fees. The company’s result for Q1 2020 showed this trend, and we expect things to remain upbeat for Nasdaq for the rest of the year.

Notably, NDAQ’s 8% growth since the beginning of 2020 means that the stock has outperformed the S&P 500 (-10%) and its peer CME over the period. Under the current scenario, we believe NASDAQ’s stock is likely to remain around its current levels, with limited upside potential post coronavirus.

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 NASDAQ’s peers. The complete set of coronavirus impact and timing analyses is available here.

 

While NASDAQ’s stock has outperformed that for its peer CME since the beginning of 2020, the latter has done well too compared to the broader market, something we highlight by comparing CME stock vs. S&P 500.

 

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