NASDAQ (NASDAQ: NDAQ) is scheduled to report its fiscal Q4 2021 results on Wednesday, January 26, 2022. We expect NASDAQ to miss the consensus estimates for revenues and earnings. The exchange outperformed the expectations in the last quarter, with net revenues increasing 17% y-o-y. It was driven by lower transaction-based expenses, followed by higher non-trading revenues. However, the positive impact was somewhat offset by lower trading revenues (market services) due to lower equity volume in the quarter. We expect the same trend to continue in the fourth-quarter results.
Our forecast indicates that NASDAQ’s valuation is $215 per share, which is 22% above the current market price of around $177. Our interactive dashboard analysis on NASDAQ’s Earnings Preview has more details.
(1) Net Revenues expected to remain slightly below the consensus estimates
NASDAQ’s revenues for full-year 2020 were $5.6 billion – up 32% y-o-y, which translated into net revenues (total revenues minus transaction-based expenses) of $2.9 billion (up 15% y-o-y). It was driven by a 21% y-o-y growth in market services net revenues, followed by an 11% growth in the non-trading revenues.
- The market services segment contributes close to 38% of the net revenues. It benefited from higher trading volumes in 2020 due to the Covid-19 crisis. This led to a 21% y-o-y increase in the segment net revenues to $1.1 billion. Further, the same pattern was observed in the first three quarters of 2021, with market services’ cumulative figure increasing 16% y-o-y to $938 million. However, the growth was primarily due to lower transaction-based expenses. We expect the fourth-quarter results to follow the same trend.
- The non-trading revenues grew 11% y-o-y to $1.8 billion in 2020. It was mainly driven by a 17% y-o-y rise in the investment intelligence unit. Further, the cumulative nine months’ non-trading revenues in 2021 have increased 22% y-o-y to $1.6 billion. We expect the non-trading revenues to continue their growth momentum in the fourth quarter.
- Overall, we expect NASDAQ’s revenues to remain around $5.9 billion for the full-year FY2021 (net revenues $3.4 billion).
Trefis estimates NASDAQ’s fiscal Q4 2021 net revenues to be around $849 million, 2% below the $866 million consensus estimate. We expect the growth in non-trading revenues to drive the fourth-quarter results.
Going forward, we expect the trading volumes to normalize in the subsequent quarters. That said, the non-trading income is likely to maintain its growth trajectory. Our dashboard on NASDAQ’s revenues offers more details on the company’s operating segments along with our forecast for FY2022.
2) EPS is likely to miss the consensus estimates
NASDAQ Q4 2021 adjusted earnings per share (EPS) is expected to be $1.65 per Trefis analysis, almost 7% below the consensus estimate of $1.77. The exchange reported a 21% y-o-y rise in the adjusted net income to $933 million in 2020. It was driven by revenue growth and a favorable decrease in operating expenses as a % of revenues. Further, the same trend continued in the first three quarters of 2021. Notably, the cumulative nine-month net income improved 31% y-o-y to $928 million. We expect the fourth-quarter earnings to be on similar lines as the last quarter. Overall, NASDAQ is likely to report an annual EPS of $7.18 for full-year 2021.
(3) Stock price estimate 22% above the current market price
We arrive at NASDAQ’s valuation, using an EPS estimate of around $7.18 and a P/E multiple of just below 30x in fiscal 2021. This translates into a price of $215, which is 22% more than the current market price of close to $177.
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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|S&P 500 Return||-8%||-8%||97%|
|Trefis MS Portfolio Return||-11%||-11%||248%|
 Month-to-date and year-to-date as of 1/24/2022
 Cumulative total returns since the end of 2016