Is NASDAQ Stock Attractive At The Current Levels?

+6.37%
Upside
192
Market
204
Trefis
NDAQ: Nasdaq logo
NDAQ
Nasdaq

NASDAQ stock (NASDAQ: NDAQ) has lost roughly 27% YTD as compared to the 20% drop in the S&P500 index over the same period. Further, at its current price of $153 per share, it is trading 25% below its fair value of $204 – Trefis’ estimate for NASDAQ’s valuationThe exchange surpassed the consensus estimates for earnings in the first quarter of 2022, while the revenues were in-line with the expectations. It posted net revenues (total revenues minus transaction-based expenses) of $892 million – up 5% y-o-y. It was driven by a 15% rise in the non-trading revenues, partially offset by a 6% drop in the market services (trading revenues). The solutions segment was partly up due to organic growth and partly due to the net impact of acquisitions and divestitures. Despite the revenue growth, the adjusted net income declined 5% y-o-y to $284 million because of lower net income from unconsolidated investees.

The trading revenues mainly suffered in Q1 due to lower cash equity volume on a year-on-year basis. However, the cash equity volume in the U.S. has increased in April and May (as per the monthly volume report of May 2022). Further, given the current uncertainty in the broader markets, the trading volume is likely to remain elevated for some more time, benefiting the trading revenues. Overall, the consensus estimates for Q2 revenues and earnings are $885.36 million and $1.94 respectively.

The company’s total revenues grew 5% y-o-y to $5.9 billion in 2021, which translated into net revenues of $3.4 billion – up 18% y-o-y. We forecast NASDAQ’s revenues to touch $5.96 billion in FY2022. Additionally, NDAQ’s adjusted net income margin is likely to see a slight drop in the year, leading to an adjusted net income of $1.1 billion and an annual GAAP EPS of $6.67. This coupled with a P/E multiple of just below 31x will lead to the valuation of $204.

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 Returns Jun 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 NDAQ Return -1% -27% 128%
 S&P 500 Return -8% -20% 71%
 Trefis Multi-Strategy Portfolio -7% -25% 196%

[1] Month-to-date and year-to-date as of 6/30/2022
[2] Cumulative total returns since the end of 2016

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