On Wednesday, Rosenblatt Securities adjusted its stance on NASDAQ:NDAQ, downgrading the stock from Buy to Neutral and reducing the price target to $64 from the previous $76. The revision reflects concerns over the company's core listings business and the broader market conditions affecting initial public offerings (IPOs) and stock listings.
The firm noted that the challenging macroeconomic environment has curtailed IPO activities and the interest in lower-quality companies that typically list on NASDAQ:NDAQ. Additionally, there is a record number of companies trading below $1, which poses a risk of delisting from the exchange.
Rosenblatt highlighted that NASDAQ:NDAQ has been diverting its focus and resources towards integrating Adenza and enhancing its non-trading capabilities. This shift has occurred while its traditional trading businesses are encountering heightened competition across various venues. As a result, NASDAQ:NDAQ has seen a continued decline in its market share in U.S. equities and options.
The firm also pointed out that more than half of NASDAQ:NDAQ's trading revenue is estimated to come from its open/close auctions, and the exchange is experiencing fewer stocks trading in these auctions. This situation is expected to limit the company's ability to cross-sell products within its Workflow & Insights segment.
Furthermore, market data revenue is anticipated to remain under pressure due to the loss of market share and increasing regulatory scrutiny. The analyst firm expressed that the investor community appears to be more perplexed by NASDAQ:NDAQ's complex business model.
The overall assessment suggests that NASDAQ:NDAQ's business momentum, often described as a flywheel, is currently in need of significant repair.
InvestingPro Insights
In light of Rosenblatt Securities' recent downgrade of NASDAQ:NDAQ, real-time data from InvestingPro reveals a nuanced financial landscape for the company. With a current market capitalization of $35.11 billion and a high price-to-earnings (P/E) ratio of 32.46, NDAQ is trading at a premium relative to its earnings. This is further underscored by an adjusted P/E ratio of 29.84 for the last twelve months as of Q1 2024, which indicates a sustained valuation by the market despite the pressures mentioned.
InvestingPro Tips suggest that while analysts have revised their earnings expectations downwards for the upcoming period, NDAQ has a history of profitability, including over the last twelve months, and has consistently raised its dividend for 12 consecutive years, with a recent 10% dividend growth. This resilience in dividend payments, coupled with a strong return over the last decade, may appeal to long-term investors seeking stability in their portfolios.
For those interested in a deeper analysis, InvestingPro offers additional tips on NDAQ, which can be accessed at https://www.investing.com/pro/NDAQ. Subscribers can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking valuable insights that could inform investment decisions. Currently, there are 9 additional InvestingPro Tips available for NDAQ, offering a comprehensive view of the company's financial health and market position.
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