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Should You Retain Nasdaq (NDAQ) Stock in Your Portfolio?

Nasdaq Inc. NDAQ has been gaining momentum on the back of its impressive organic growth, ramping up of on-trading revenue base, strategic buyouts to capitalize on growing market opportunities and effective capital deployment.

Optimistic Growth Projections

The Zacks Consensus Estimate for Nasdaq’s 2024 revenues is pegged at $4.60 billion, implying a year-over-year improvement of 18.2%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 12.8% and 7.1%, respectively, from the corresponding 2024 estimate.

NDAQ’s bottom line has grown 12.7% in the past five years, better than the industry average of 9.8%.

Zacks Rank & Price Performance

Nasdaq currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 8.2% compared with the industry’s growth of 35.9%.

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Zacks Investment Research


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Earnings Surprise History

NDAQ has a decent earnings surprise history. It beat estimates in three of the last four quarters and missed once, the average being 3.75%.

Return on Equity

The company’s return on equity was 17% in the trailing 12 months, better than the industry average of 13.1%.

Business Tailwinds

Nasdaq’s strategy of generating more revenues from high-growth Market Technology and Investment Intelligence segments, redirecting R&D spending toward higher-growth products, expanding its Anti-Financial Crime clientele, as well as making innovations, bodes well for growth.  NDAQ targets 5-7% long-term growth from a non-trading revenue base.

The company has an impressive inorganic growth story. The Adenza Group buyout boosts its Marketplace Technology and Anti-Financial Crime solutions apart from strengthening offerings across a wider spectrum of regulatory technology, compliance and risk management solutions. Nasdaq estimates Solutions Business' medium-term organic revenue growth in the range of 6-9%.

NDAQ has been investing in proprietary data and migrating markets and SaaS solutions to capitalize on the immense opportunity offered by the cryptocurrency markets.

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. Verafin consolidated Nasdaq's established reg tech leadership to create a global SaaS leader. NDAQ aims to achieve 40-50% SaaS revenues as a percentage of total revenues by 2025.

The company estimates strong growth from its index and analytics businesses, followed by moderate growth in its exchange data products across U.S. and Nordic equities.

Due to a change in corporate structure, NDAQ is estimated 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 $80 million by 2025 and $80 million in cost to accomplish the restructuring program.

Banking on the strength of a diverse business model that helps maintain a healthy balance sheet and cash position, NDAQ increased its dividend at a nine-year (2015-2023) CAGR of 6%. It also has $1.9 billion remaining in its authorization kitty. Notably, its free cash flow conversion has remained more than 100% over the last many quarters, reflecting its solid earnings.

Stocks to Consider

Some better-ranked stocks from the finance sector are Coinbase Global, Inc. COIN, BrightSphere Investment Group Inc. BSIG and T. Rowe Price Group, Inc. TROW, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coinbase Global has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 364.63%. In the past year, shares of COIN have gained 280.5%.

The Zacks Consensus Estimate for COIN’s 2024 and 2025 earnings has moved up 219% and 77.8%, respectively, in the past seven days.

BrightSphere Investment has a solid track record of beating earnings estimates in three of the trailing four quarters and matching in one, the average being 29.34%. In the past year, shares of BSIG have gained 5.1%.

The Zacks Consensus Estimate for BSIG’s 2024 and 2025 earnings implies year-over-year growth of 24.7% and 14.8%, respectively.

T. Rowe Price Group has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 16.8%. In the past year, shares of TROW have gained 7.6%.

The Zacks Consensus Estimate for TROW’s 2024 and 2025 earnings implies year-over-year growth of 15.9% and 0.6%, respectively.

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Nasdaq, Inc. (NDAQ) : Free Stock Analysis Report

T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report

BrightSphere Investment Group Inc. (BSIG) : Free Stock Analysis Report

Coinbase Global, Inc. (COIN) : Free Stock Analysis Report

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