On Wednesday, Deutsche Bank (ETR:DBKGn) upgraded Nasdaq OMX Group Inc. (NASDAQ:NDAQ) stock from Hold to Buy and increased the price target to $98.00, up from the previous target of $80.00.
The adjustment comes with a positive outlook on the company's earnings potential over the next few years. According to InvestingPro data, five analysts have recently revised their earnings estimates upward, with analyst targets ranging from $64 to $102.
Analysts at Deutsche Bank expressed confidence in Nasdaq's ability to deliver annual double-digit earnings per share (EPS) growth during the 2025-27 forecast period. This optimism is based on the company's performance following the Adenza deal completed in November 2023, which is expected to initially dilute EPS growth to less than 1% in 2024.
The stock has shown strong momentum, with InvestingPro data revealing a 27% price return over the past six months, though current valuations suggest the stock may be trading above its Fair Value.
Despite the limited EPS growth Nasdaq has experienced over the past three years, with a 6% increase in both 2022 and 2023, Deutsche Bank sees a significant turnaround ahead.
The firm's analysts believe that Nasdaq's growth profile is "quite differentiated in the securities exchange space" compared to its peers, which are anticipated to see only single-digit EPS growth in at least 2025 and 2026.
The company maintains solid fundamentals with a 64.7% gross profit margin and has consistently raised dividends for 13 consecutive years, as highlighted in InvestingPro's comprehensive analysis (subscribers can access 8 additional ProTips and detailed financial metrics).
The upgrade reflects a greater conviction in Nasdaq's strategic moves and its potential to outperform within the industry. The Adenza deal, although initially dilutive to earnings, is expected to contribute to the company's robust growth trajectory in the longer term.
Deutsche Bank's revised price target of $98.00 indicates a notable increase in value expectation for Nasdaq's stock, suggesting a promising investment outlook for the exchange company as it navigates through the forecasted growth period.
In other recent news, Nasdaq has reported a robust third quarter in 2024, marking four consecutive quarters of double-digit growth.
This growth is attributed to a 10% increase in both net revenues and solutions revenue, and a rise in total annualized recurring revenue to $2.7 billion, an 8% increase from the previous year. The company's success was further driven by the integration of AxiomSL and Calypso.
In addition, Nasdaq received an Outperform rating from William Blair, reflecting the company's successful transition from a traditional exchange operator to a technology leader in global capital markets. The firm highlighted Nasdaq's diversified revenue streams and scalable technology solutions, which are expected to support long-term growth prospects.
In a different development, the company announced that it would close all of its U.S. equities and options markets on a specific day to honor the late President Jimmy Carter. The closure is expected to allow traders, investors, and Nasdaq employees to pay their respects to President Carter.
Lastly, Super Micro Computer (NASDAQ:SMCI) is working diligently to maintain its NASDAQ listing with the assistance of BDO USA, amid potential delisting risks.
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