Analyst Note| Michael Miller |
Narrow-moat-rated Nasdaq reported good second-quarter earnings, comfortably beating the FactSet consensus EPS estimate of $1.76 with reported EPS of $1.90. Net revenue increased 21% year over year, or 15% when adjusted for the acquisition of Verafin and changes in foreign-exchange rates. Sequentially, revenue was essentially unchanged; however, this was largely due to market services revenue declining 7.7% from the last quarter as equity trading volume fell from its fever pitch earlier in the year. We were expecting trading conditions to calm down, and trading volume remains strong despite the decrease, particularly at the company's options exchanges. Nasdaq is likely a beneficiary of the transition to $0-commission trades at retail brokers, though it will need to contend with new competitors in the equity exchange space like Members Exchange, which launched at the end of 2020. We do not expect to change our fair value estimate as we incorporate these results.