NASDAQ (NASDAQ: NDAQ) is scheduled to report its fiscal Q2 2021 results on Wednesday, July 21. We expect NASDAQ to top the consensus estimates of earnings and revenues. The exchange posted better than expected results in the last quarter driven by strong growth in its top-line. This rise was driven by higher U.S. trading volumes and a jump in investment intelligence revenues. That said, we expect the trading volumes to see some sequential drop in the second quarter, and non-trading revenues to drive the results.
Our forecast indicates that NASDAQ’s valuation is around $170 per share, which is 5% below the current market price of around $179. Look at our interactive dashboard analysis on NASDAQ’s pre-earnings: What To Expect in Q2? for more details.
(1) Net revenues expected to miss the consensus estimates in Q2
Trefis estimates NASDAQ’s fiscal Q2 2021 net revenues to be around $794 million, 2% below the $811 million consensus estimate. The firm’s revenues for the full year 2020 grew 32% y-o-y to $5.6 billion, translating into net revenues (revenues minus transaction rebates, brokerage, clearance, and exchange fees) of $2.9 billion – up 15% y-o-y. It was driven by growth in both trading and non-trading revenues. While the trading revenues (market services) rose due to higher trading volumes in the market, the non-trading revenues mainly benefited from positive growth in the investment intelligence segment. The same growth momentum continued in the first quarter of FY2021 as well, with both the market services and investment intelligence revenues increasing on a year-on-year basis. That said, we expect the trading volumes to see some drop in the second quarter, negatively impacting the market services stream. However, the non-trading revenues are likely to continue their growth trajectory.
The trading volumes were unusually high in 2020 due to the impact of the Covid-19 crisis and the economic slowdown. However, we expect the volumes to see some decline in 2021, with an improvement in the economic conditions. Overall, the company’s revenues are likely to touch $6.1 billion (net revenues of $3.3 billion) in the year. Our dashboard on NASDAQ’s revenues offers more details on the company’s segments.
(2) EPS likely to beat the consensus estimates
NASDAQ’s Q2 2021 adjusted earnings per share (EPS) is expected to be $1.72 per Trefis analysis, marginally above the consensus estimate of $1.70. The company’s profitability figures received a major boost in 2020, driven by growth in the top line. It improved the EPS figure from $4.63 to $5.59. The same trend was evident in the first quarter of FY2021 and we expect it to continue in the second quarter as well.
The net income margin is likely to see a slight drop in the 2021 level, eroding some of the positive impacts of higher revenues. Overall, it will enable NDAQ to report an EPS of around $5.71 in the current year.
(3) Stock price estimate 5% less than the current market price
Going by our NASDAQ’s valuation, with an EPS estimate of around $5.71 and a P/E multiple of just below 30x in fiscal 2021, this translates into a price of $170, which is 5% below the current market price of around $178.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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