UBS: Nasdaq is undergoing a transformation, and it could lift the stock 25%

One of the top stock exchanges in the US could see its stock price increase by 25% over the next 12 months despite a first quarter slowdown in activity.
That’s according to UBS equity analyst John W. Forman, who said in a note to clients that Nasdaq could see its stock increase to $US85 per share, above its current market price of about $US68 per share.

This is despite some lacklustre first quarter data.

“Following the softer-than-expected March, volumes in the 1Q ended mostly down y/y, and US equities and options as well as European derivatives volumes came in below our latest forecasts,” the bank said.

As such, the bank has lowered its estimate for Nasdaq’s earnings per share.

“In addition to lower-than-expected volumes in these areas, lower US equity and options pricing added to downside in our estimate revision,” they added.

But there are some longer term “bright spots” for the firm. For instance, Nasdaq’s oil and energy futures exchange NFX, which launched in 2015, and European fixed income business experienced growth in the first quarter.

The evolution of the company’s business model is another tailwind, according to UBS.

“Nasdaq’s business mix has continued to evolve, and as investors continue to shift their perception of Nasdaq to more of a financial technology company, we think the multiple will continue to expand,” the bank said.

As such, the firm’s stock is the favoured pick of UBS among exchanges. The bank said:

“Nasdaq’s business mix continues to evolve, and we believe management’s continued efforts to create more visibility should attract a new investor base and drive further multiple expansion. We also view NDAQ as the most defensive stock in our exchange coverage during times of uncertainty in equity markets while still offering upside from a cyclical upturn in volatility and volume.”

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