Here's Why Should You Stay Invested in Nasdaq (NDAQ) Stock


Nasdaq Inc.’s (NDAQ - Free Report) accelerating organic growth, focus on ramping up the on-trading revenue base, strategic buyouts to capitalize on growing market opportunities, effective capital deployment along with favorable growth estimates make it worth retaining in one’s portfolio.

NDAQ has a decent track record of beating earnings estimates in three of the last four quarters, the average being 3.38%.

Zacks Rank & Price Performance

Nasdaq currently carries a Zacks Rank #3 (Hold). In a year, the stock has lost 14.3% against the industry’s increase of 0.2%.

Optimistic Growth Projections

The Zacks Consensus Estimate for Nasdaq’s 2023 earnings is pegged at $2.70 per share, indicating a 1.5% increase from the year-ago reported figure on 4.4% higher revenues of $3.7 billion. The consensus estimate for 2024 earnings is pegged at $2.91, indicating a 7.8% increase from the year-ago reported figure on 5.4% higher revenues of $3.9 billion.

The expected long-term earnings growth rate is currently pegged at 4.6%.

Return on Equity (ROE)

Return on equity was 22.1% in the trailing twelve months, better than the industry average of 13.5%.

Growth Drivers

Nasdaq remains focused on generating more revenues from high-growth Market Technology and Investment Intelligence segments and diverting R&D spending toward higher-growth products. This in turn should accelerate its growth. The company targets 5-7% long-term growth from a non-trading revenue base.

Nasdaq has been accelerating its technology expansion, given the opportunities offered by the cryptocurrency markets. Technology expansion with SMARTS surveillance in non-financial markets is in tandem with this growth strategy.

Nasdaq noted that the anti-fin crime space has a total addressable market of $12.5 billion and is expected to witness a CAGR of 17% through 2024. The acquisition of Verafin in February 2021 consolidated Nasdaq's established reg tech leadership to create a global SaaS leader. Nasdaq aims 40-50% Saas revenues as a percentage of total revenues by 2025.

It also boasts an impressive inorganic growth story. The buyout of and Metrio will help NDAQ address expanding client ESG needs.

NDAQ estimates growth from its index and analytics businesses, followed by moderate growth in its exchange data products across U.S. and Nordic equities.  Nasdaq estimates 5%- 8% revenue organic growth in Investment Intelligence, 13%-16% in Market Technology and 3%-5% in Corporate Platform segments over the medium term.

Nasdaq has a healthy balance sheet and cash position along with modest operating cash flow from its diverse business model. Banking on balance sheet strength, it engages in effective capital deployment.

Nasdaq has been hiking dividends at a five-year CAGR (2018-2022) of 9.6%. It had $650 million remaining under authorization as on Dec 31, 2022.

However, due to change in corporate structure, the company expects to incur $115 million to $145 million in pretax charges, of which about 40% will be non-cash charges. Nonetheless, this will help unlock revenue synergies. Nasdaq is estimating benefits in the form of combined annual run rate operating efficiencies and revenue synergies of at least $30 million by 2025.

Stocks to Consider

Some better-ranked stocks from the finance sector are Ameriprise Financial, Inc. (AMP - Free Report) , AllianceBernstein Holding L.P. (AB - Free Report) and AssetMark Financial Holdings, Inc. (AMK - Free Report) . While Ameriprise Financial and AllianceBernstein sport a Zacks Rank #1 (Strong Buy), AssetMark Financial carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ameriprise Financial’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 5.50%. In the past year, Ameriprise Financial has rallied 10.3%

The Zacks Consensus Estimate for AMP’s 2023 and 2024 earnings indicates 22.1% and 8.1% year-over-year growth, respectively.

AllianceBernstein’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 10.32%. In the past year, AB has lost 13.2%.

The Zacks Consensus Estimate for AB’s 2024 earnings indicates 3.97% year-over-year growth.

AssetMark Financial’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 7.95%. In the past year, AssetMark Financial has rallied 39.4%.

The Zacks Consensus Estimate for AMK’s 2023 and 2024 earnings indicates 24.2% and 6.2% year-over-year growth, respectively.

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