Analyst Note
| Michael Miller |We are initiating coverage on MarketAxess with a $355 per share fair value estimate, wide moat rating, and an Exemplary capital allocation rating. We consider the stock 13.1% overvalued based on the $408.61 closing price on Nov. 1. Our fair value translates to an 2021 enterprise value/EBITDA ratio of 31 times. MarketAxess will likely see its earnings fall slightly in 2021 after a very strong 2020, as U.S. corporate bond trading volumes industry-wide have fallen from cyclical highs to cyclical lows as the lack of credit spread volatility has weighed on bond market activity. That said, MarketAxess’ secular growth drivers are still intact, and we see a long runway of double-digit revenue growth for the firm.