Here's Why Should You Stay Invested in Nasdaq (NDAQ) Stock
Nasdaq Inc.’s NDAQ improving organic growth, focus on ramping up the on-trading revenue base, buyouts to capitalize on growing market opportunities, effective capital deployment and favorable growth estimates make it worth retaining in one’s portfolio.
NDAQ has a decent track record of beating estimates. Its earnings beat estimates in three of the last four quarters, the average being 4.40%. Earnings in the last five years grew 13.6% compared with the industry average of 10.5%.
Return on equity was 22.2% in the trailing 12 months, better than the industry average of 10.8%. It has a VGM Score of B.
Zacks Rank & Price Performance
Nasdaq currently carries a Zacks Rank #3 (Hold). Year to date, the stock has lost 19.1% against the industry’s increase of 5.4%.
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Northbound Estimate Revision
The Zacks Consensus Estimate for Nasdaq’s 2023 earnings has moved up by 2 cents in the last 60 days reflecting analysts’ optimism.
Optimistic Growth Projections
The Zacks Consensus Estimate for Nasdaq’s 2023 earnings is pegged at $2.71 per share, indicating a 1.9% increase from the year-ago reported figure on 3.6% higher revenues of $3.7 billion. The consensus estimate for 2024 earnings is pegged at $2.83, indicating a 4.4% increase from the year-ago reported figure on 5.1% higher revenues of $3.9 billion.
It carries a Growth Score of B.
Business Tailwinds
Nasdaq’s growth strategy encompasses generating more revenues from high-growth Market Technology and Investment Intelligence segments and diverting R&D spending toward higher-growth products. NDAQ targets 5-7% long-term growth from a non-trading revenue base.
Nasdaq has also grown significantly over the years through a number of strategic expansions. Agreeing to buy Adenza Group, a premium software and technology company, is expected to boost Nasdaq’s Marketplace Technology and Anti-Financial Crime solutions. The transaction will strengthen offerings across a wider spectrum of regulatory technology, compliance and risk management solutions after materializing. Nasdaq’s annualized recurring revenues, as a percentage of 2023 pro forma total revenues, increased to 60% from 56% in 2022 and boosted Nasdaq’s Solutions Businesses, as a percentage of 2023 pro forma total revenues, to 77%. It also increased Nasdaq’s Solutions Businesses medium-term organic revenue growth outlook from 7-10% to 8-11%.
Notably, NDAQ achieved more than 400% total shareholder return since 2014.
Nasdaq has also been accelerating its technology expansion to capitalize on the opportunities in cryptocurrency markets. Given a revolutionary change in technological innovation in artificial intelligence, NDAQ has been making investments in proprietary data and migrating markets and SaaS solutions to the cloud to reap benefits.
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.
The firm 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’s diverse business model supports a healthy balance sheet and cash position along with modest operating cash flow. Banking on solid capital position, NDAQ raised dividends at a nine-year CAGR (2018-2023) of 6% and expects to attain a dividend payout ratio of 35-38% in three to four years. It also had $491 million remaining under authorization as of Mar 31, 2023.
Due to a change in corporate structure, NDAQ estimates 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 estimates 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 Reinsurance Group of America RGA, Primerica PRI and GoHealth GOCO.
Reinsurance Group’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, while missing in one. RGA sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RGA’s 2023 and 2024 earnings per share indicates a year-over-year increase of 22.9% and 1.4%, respectively. Year to date, RGA’s shares have lost 1.9%.
Primerica’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, while missing in one. PRI carries a Zacks Rank #2.
The Zacks Consensus Estimate for PRI’s 2023 and 2024 earnings per share indicates a year-over-year increase of 34% and 11.5 respectively. Year to date, PRI’s shares have surged 33.2%.
GoHealth’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters, while missing in the other two. GOCO carries a Zacks Rank #2.
The Zacks Consensus Estimate for GOCO’s 2023 and 2024 earnings per share indicates a year-over-year increase of 73.1% and 12.2%, respectively. Year to date, GOCO’s shares have surged 85.5%.
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Nasdaq, Inc. (NDAQ) : Free Stock Analysis Report
Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
Primerica, Inc. (PRI) : Free Stock Analysis Report
GoHealth, Inc. (GOCO) : Free Stock Analysis Report
