U.S. Markets open in 7 hrs 41 mins

Nasdaq Rallies 17% Year to Date: What's Aiding the Stock?

Zacks Equity Research

Nasdaq Inc. NDAQ shares have gained 16.8% year to date, outperforming its industry’s rise of 14.5% and Zacks S&P 500 composite’s gain of 13.9%. With a market capitalization of $15.8 billion, average volume of shares traded in the last three months was 0.6 million. In fact, shares of the company hit a new 52-week of $97.47 in yesterday’s trading session.



What’s Behind the Upside?

Nasdaq’s return on equity — a measure of profitability — is 14.6%, better than the industry average of 11%. This reflects the company’s prudent usage of its shareholders’ funds.

Due to the sale of BWise in April 2019, the company lowered its non-GAAP operating expense guidance for 2019 to a range of $1.29 billion to $1.33 billion from the prior expectation of $1.325 to $1.375 billion.

The company also rewards its shareholders with dividend hike and share repurchases, reflecting effective capital deployment. The 7% hike in dividend approved in April was in line with the company’s policy of hiking dividend over the long term as earnings and cash flow increase. Its dividend yield of 1.9% betters the industry average of 1.4%, making it an attractive pick for yield-seeking investors.

The Zacks Rank #3 (Hold) company has a decent surprise history with a four-quarter average beat of 1.50%.  

Recently, the company recorded solid volumes for May 2019. While U.S. equity options volume increased 10% year over year to 154 million contracts, European options and futures volume increased 14.5% year over year to 8.7 million contracts.

Will the Rally Continue?

Nasdaq remain focused on Market Technology and Information Services businesses that offer the biggest growth opportunities per the company’s developmental strategies.

Strategic acquisitions have helped it gain direct access to the Canadian equities market, expand its technology offering, fortify its Corporate Solutions business and improve its market surveillance techniques.

Nasdaq is on track with its goals of maximizing opportunities as an innovative analytics and technology partner in the capital markets.  It also intends to develop and deploy marketplace economy, technology strategy and consolidate competitive edge in its core businesses.

Nasdaq’s strategy of accelerating its non-transaction revenue base that includes market technology, listing and information revenues infuse dynamism in its business profile. Management estimates 8-11% growth over the medium term.

Technological expansion with SMARTS surveillance in non-financial markets reflects the company’s focus on capitalizing on emerging opportunities in the cryptocurrency markets.

The consensus mark for earnings and revenues translates into year-over-year improvement for both 2019 and 2020. The long-term expected earnings growth rate is currently pegged at 7.4%.

Stocks to Consider

Some better-ranked stocks from the finance sector are Argo Group International Holdings, Ltd. ARGO, Arbor Realty Trust ABR and Artisan Partners Asset Management Inc. APAM. Each stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty markets. It came up with average four-quarter beat of 224.07%.

Arbor Realty invests in a diversified portfolio of structured finance assets in the multifamily and commercial real estate markets. It delivered average four-quarter beat of 12.91%.

Artisan Partners provides its services to pension and profit sharing plans, trusts, endowments, foundations, charitable organizations, government entities, private funds and non-U.S. funds, as well as mutual funds, non-U.S. funds and collective trusts. It delivered average four-quarter beat of 1.04%.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.