Sep 24, 2020
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NASDAQ Stock Is Too High

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NEW YORK CITY UNITED STATES – 2020/02/20: An emblem of the Nasdaq Stock Market seen in Midtown. [+] SOPA IMAGES/LIGHTROCKET VIA GETTY IMAGES Despite a 77% rise because the March 23 lows of this year at the current price of around $125 per share we believe NASDAQ Inc. stock (NASDAQ: NDAQ) looks fully valued in accordance with its historic P/E multiples


NASDAQ a world financial exchange group has seen its stock rally from $73 to $129 off the new bottom compared to the S&P which moved around 50%. Its stock is beating the wider markets as the company has benefited from market volatility with the aid of the Covid-19 crisis leading to higher trading activity


Notably its revenues grew by 12% y-o-y in Q2 2020 mainly driven by higher U. S. industry trading volumes. Further its stock is trading near its all-time high – 22% above the levels seen in late 2019. NASDAQ s stock has surpassed the level it was at before the drop in February with the aid of the coronavirus outbreak becoming a pandemic


This seems to make it fully valued as honestly trading activity is prone to normalize over the arrival months. Some of this rise of the last 2 years is justified by the roughly 8% growth seen in NASDAQ s revenues from 2017 to 2019 which translated into similar growth in Net Income


While the company has had sluggish revenue and earnings growth over recent years its P/E multiple has seen an important increase. We believe the stock is unlikely to see an upside after the new rally and the aptitude weakness from a recession-driven by the Covid outbreak. Our dashboard Why NASDAQ Stock moved 76% between 2017 and now has the underlying numbers


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Going All In On Young Voter Education NASDAQ s P/E multiple changed from around 17x in 2017 to about 23x in 2019


While the company s P/E is just under 28x now there’s a downside when the present P/E is compared to levels seen ago years – P/E of practically 23x at the end of 2019 and around 17x as recent as late 2017. So what s the likely trigger and timing for the downside? NASDAQ Inc


is a holding company that engages in trading clearing exchange technology regulatory securities listing information and public & private company services. Market Services is its main contributing segment – inclusive of Cash Equity Trading FICC (Fixed Income Currency and Commodity) trading Equity Derivative Trading and Clearing and Trade Management Services with a total revenue share of more than 62% over the new years


The segment generates revenue in terms of clearing and transaction fees which are charged on per transaction basis. With the aid of the continuing coronavirus pandemic and economic uncertainty securities markets are witnessing high trading activity leading to higher revenue for the company. However as the lockdown restrictions are eased world wide the commercial condition is prone to see some improvement inside the third quarter


it’s also validated from the recently released U. S consumer spending data which indicates a m-o-m growth of 8. 5% in May followed by 5. 6% in June and 1. 9% in July. This in turn is prone to reduce the better market volatility and normalize the trading volumes leading to a drop in NASDAQ s revenue growth rate on a sequential basis


However over the arrival weeks we predict continued improvement fashionable and subdued growth inside the variety of new Covid-19 cases in the us to buoy market expectations. Following the Fed stimulus — which helped to set a floor on fear — the market has been willing to glance through the present weak period and take a longer-term view with investors now mainly focusing their attention on 2021 results


Though market sentiment can be fickle and evidence of a sustained uptick in new cases could spook investors once again. What if you re searching for a more balanced portfolio instead? Here s a top-quality portfolio to outperform the market with over 100% return since 2016 versus 55% for the S&P 500 Created from companies with strong revenue growth healthy profits plenty of cash and low risk


It has outperformed the wider market year after year consistently. See all Trefis Price Estimates and Download Trefis Data here What s behind Trefis? See How It s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product R&D and Marketing Teams

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