NASDAQ stock (NASDAQ: NDAQ) has lost approximately 10% YTD as compared to the 17% drop in the S&P500 index over the same period. Further, at its current price of $63 per share, it is trading 7% below its fair value of $68 – Trefis’ estimate for NASDAQ’s valuation. The exchange posted mixed results in the third quarter of 2022, with earnings beating the consensus but revenues remaining marginally below the expected figure. It reported net revenues (total revenues minus transaction-based expenses) of $890 million – up 6% y-o-y. It was driven by an 8% growth in the solutions segment (non-trading revenues), followed by a 4% increase in market services (trading revenues). Notably, annualized recurring revenues (ARR) improved by 8% y-o-y in Q3. On the cost front, the expenses as a % of revenues decreased in the quarter. However, the positive impact was somewhat offset by lower other income. Overall, the adjusted net income grew 2% y-o-y to $294 million.
The total revenues rose by 6% y-o-y to $2.68 billion in the first nine months of 2022, primarily driven by growth in non-trading revenues. Further, the expenses as a % of revenues saw a favorable decrease over the same period. Despite this, the adjusted net income decreased by 5% y-o-y to $884 million due to lower other income and a drop in net income from unconsolidated investees.
Moving forward, we expect both the trading and non-trading revenues to improve in Q4. Altogether, NASDAQ’s revenues are estimated to touch $6.2 billion in FY2022. Additionally, NDAQ’s adjusted net income margin is likely to remain around 19% in the year, leading to an adjusted net income of $1.18 billion and an annual GAAP EPS of $2.37. This coupled with a P/E multiple of just below 29x will lead to a valuation of $68.
|S&P 500 Return||-4%||-17%||76%|
|Trefis Multi-Strategy Portfolio||-3%||-20%||216%|
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 Month-to-date and year-to-date as of 12/12/2022
 Cumulative total returns since the end of 2016