Company Reports

Narrow-moat-rated Nasdaq reported decent first-quarter earnings that came in a bit below our expectations as strong results from the firm’s index segment were partially offset by weakness in its exchange business. Net revenue increased 22% from last year, or 6% when adjusted for the acquisition of Adenza. Adjusted diluted earnings per share fell to $0.63 from $0.69 last year as lower trading revenue and share dilution from the Adenza acquisition weighed on results. As we incorporate these results, we do not plan to materially alter our $60 fair value estimate, and we see the shares as fairly valued.

We are increasing our fair value estimate for Nasdaq to $60 from $55, which is equivalent to 28 times our projected 2024 earnings. Around $1 of our positive adjustment comes from earnings since our last update. The rest of the increase comes from higher near- to medium-term revenue growth projections as Nasdaq benefits from improving market conditions and strong secular growth in its new software businesses.

Nasdaq’s exchange business continues to produce strong results as volatile markets lead to good trading volume industrywide, with Nasdaq's option exchanges in particular performing well. While we expect trading to normalize over time, the increased prevalence of $0-commission trading platforms and a shift toward higher option volume should provide a persistent benefit to Nasdaq’s exchanges. However, the equity exchange business remains highly competitive, and Nasdaq has been steadily losing market share for years. We expect this pressure to continue as two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, with the Members Exchange also expanding into options in 2023.

Narrow-moat-rated Nasdaq reported decent fourth-quarter results. Solid performance in solutions revenue was offset by weaker performance at the exchanges and integration-related expenses. Net revenue increased 23.3% from last year to $1.1 billion, or 6.5% when adjusted for the acquisition of Adenza. On other hand, earnings per share declined to $0.36 from $0.48 last year due to acquisition-related costs and share dilution. As we incorporate these results, we do not plan to materially alter our $55 fair value estimate.

While the core exchange business remains highly attractive, generating substantial cash flow while requiring minimal incremental capital, the industry is mature and faces limited growth prospects. This is particularly true for U.S. equity and options exchanges, as increased competition and regulatory pressure further reduce growth potential for trading and market data revenue. Additionally, antitrust considerations leave little room for further industry consolidation.

Nasdaq’s exchange business continues to produce strong results as volatile markets lead to good trading volume industrywide, with Nasdaq's option exchanges in particular performing well. While we expect trading to normalize over time, the increased prevalence of $0-commission trading platforms and a shift toward higher option volume should provide a persistent benefit to Nasdaq’s exchanges. However, the equity exchange business remains highly competitive, and two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, adding to the competitive pressure Nasdaq faces. Additionally, Nasdaq has seen continued pushback from clients and regulators on the pricing of its market data products.

Narrow-moat-rated Nasdaq reported solid third-quarter earnings as strong antifinancial crime and index revenue growth was partially offset by a decrease in trading revenue. Net revenue increased 5.6% from last year and 1.6% from last quarter to $940 million. Meanwhile, a higher effective tax rate and an increase in nonoperating costs left earnings per share flat at $0.60. As we incorporate these results, we do not plan to materially alter our $55 per share fair value estimate and see the shares as fairly valued at current prices.

Nasdaq’s exchange business continues to produce strong results as volatile markets lead to good trading volume industrywide, with Nasdaq's option exchanges in particular performing well. While we expect trading to normalize over time, the increased prevalence of $0-commission trading platforms and a shift toward higher option volume should provide a persistent benefit to Nasdaq’s exchanges. However, the equity exchange business remains highly competitive, and two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, adding to the competitive pressure Nasdaq faces. Additionally, Nasdaq has seen continued pushback from clients and regulators on the pricing of its market data products.

Narrow moat-rated Nasdaq reported second-quarter results that were in line with our expectations, as trading revenue and listing income acted as headwinds to growth while the company's anti-financial-crime segment saw continued momentum. Net revenue increased 3.6% from last year and 1.2% from last quarter to $925 million. Meanwhile, earnings per share fell to $0.54 from $0.62 last year, with the decline primarily driven by $57 million in merger and restructuring charges. As we incorporate these results, we do not plan to materially alter our $55 fair value estimate. We see the shares as roughly fairly valued at the current price.

Nasdaq’s exchange business continues to produce strong results as volatile markets lead to good trading volume industrywide, with Nasdaq's option exchanges in particular performing well. While we expect trading to normalize over time, the increased prevalence of $0-commission trading platforms and a shift toward higher option volume should provide a persistent benefit to Nasdaq’s exchanges. However, the equity exchange business remains highly competitive, and two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, adding to the competitive pressure Nasdaq faces. Additionally, Nasdaq has seen continued pushback from clients and regulators on the pricing of its market data products.

Narrow moat-rated Nasdaq announced that it intends to acquire Adenza, a provider of risk management and post-trade reporting software, for $10.5 billion. Nasdaq intends to pay for the deal with a mix of $4.75 billion in cash and by issuing more than 85 million shares. The deal will leave Thoma Bravo with nearly 15% of Nasdaq and the other firm will be able to nominate Holden Spaht to Nasdaq's board.

Strong performance at Nasdaq’s exchange business persisted in, as higher market volatility and increased retail interest in equity markets has proven surprisingly durable, particularly in equity options. While we expect retail trading to normalize over time, the increased prevalence of $0 commission trading platforms should continue to provide a modest tailwind to trading volume. However, the equity exchange business remains highly competitive, and two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, adding to the competitive pressure Nasdaq faces. Additionally, Nasdaq has seen continued pushback from clients and regulators on the pricing of its market data products.

Narrow-moat Nasdaq reported first-quarter earnings that were in line with our expectations, with weakness in its index and listing businesses offset by strong performance from its market technology and antifinancial crime segments. Net revenue increased 2% from last year and 0.9% sequentially to $914 million. Meanwhile, EPS rose 7% year over year to $0.61 per share. As we incorporate these results, we are maintaining our $58 per-share fair value estimate for the firm.

Strong performance at Nasdaq’s exchange business persisted in, as higher market volatility and increased retail interest in equity markets has proven surprisingly durable, particularly in equity options. While we expect retail trading to normalize over time, the increased prevalence of $0 commission trading platforms should continue to provide a modest tailwind to trading volume. However, the equity exchange business remains highly competitive, and two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, adding to the competitive pressure Nasdaq faces. Additionally, Nasdaq has seen continued pushback from clients and regulators on the pricing of its market data products.

Narrow-moat-rated Nasdaq reported weak fourth-quarter earnings that were largely in line with our expectations, as market conditions continue to act as headwinds for Nasdaq's results. Net revenue grew 2.4% from last year, or 5% on an adjusted basis, to $906 million. However, higher expenses meant earnings per share were flat year over year and down 5.9% sequentially to $0.64. As we incorporate these results, we do not plan to materially alter our $57 fair value estimate for Nasdaq.

The North American exchanges have undergone substantial changes in recent years, as regulatory changes, sharp shifts in market conditions, and Intercontinental Exchange and Nasdaq’s continued efforts to reposition their firms as diversified technology companies have kept the group in flux. The exchanges have enjoyed substantial tailwinds over the last couple of years as their core trading and listing operations benefited from cyclical highs in equity market volatility and IPO activity, with futures and options volume far above prepandemic levels. We do expect these tailwinds to fade and project more normalized rates of growth going forward, but, in our view, recent market activity has left shares of some exchanges oversold and we see opportunity for investors in the industry group.

Strong performance at Nasdaq’s exchange business persisted in, as higher market volatility and increased retail interest in equity markets has proven surprisingly durable, particularly in equity options. While we expect retail trading to normalize over time, the increased prevalence of $0 commission trading platforms should continue to provide a modest tailwind to trading volume. However, the equity exchange business remains highly competitive, and two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, adding to the competitive pressure Nasdaq faces. Additionally, Nasdaq has seen continued pushback from clients and regulators on the pricing of its market data products, which has limited the revenue growth from the company’s market data.

While narrow-moat-rated Nasdaq reported decent third-quarter earnings, cyclical headwinds to some of Nasdaq's recent growth drivers are becoming an impediment to growth. Net revenue rose 6.2% year over year but was once again effectively unchanged sequentially at $890 million. Earnings per share rose 5.4% from last year's quarter to $0.59. As we incorporate these results, we do not expect to materially alter our $56 per share fair value estimate for the firm.

Strong performance at Nasdaq’s exchange business persisted in, as higher market volatility and increased retail interest in equity markets has proven surprisingly durable, particularly in equity options. While we expect retail trading to normalize over time, the increased prevalence of $0 commission trading platforms should continue to provide a modest tailwind to trading volume. However, the equity exchange business remains highly competitive, and two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, adding to the competitive pressure Nasdaq faces. Additionally, Nasdaq has seen continued pushback from clients and regulators on the pricing of its market data products, which has limited the revenue growth from the company’s market data.

Strong performance at Nasdaq’s exchange business persisted in, as higher market volatility and increased retail interest in equity markets has proven surprisingly durable, particularly in equity options. While we expect retail trading to normalize over time, the increased prevalence of $0 commission trading platforms should continue to provide a modest tailwind to trading volume. However, the equity exchange business remains highly competitive, and two new exchanges were launched in 2020, Members Exchange and the MIAX Pearl Equities Exchange, adding to the competitive pressure Nasdaq faces. Additionally, Nasdaq has seen continued pushback from clients and regulators on the pricing of its market data products, which has limited the revenue growth from the company’s market data.