Despite a 77% rise since the March 23 lows of this year, at the current price of around $125 per share we believe NASDAQ Inc. stock (NASDAQ: NDAQ) looks fully valued based on its historic P/E multiples. NASDAQ, a global financial exchange group, has seen its stock rally from $73 to $129 off the recent bottom compared to the S&P which moved around 50%. Its stock is beating the broader markets as the company has benefited from market volatility due to the Covid-19 crisis, leading to higher trading activity. Notably, its revenues grew by 12% y-o-y in Q2 2020, mainly driven by higher U.S. industry trading volumes. Further, its stock is trading near its all-time high – 22% above the levels seen in late 2019.
NASDAQ’s stock has surpassed the level it was at before the drop in February due to the coronavirus outbreak becoming a pandemic. This seems to make it fully valued as, in reality, trading activity is likely to normalize over the coming months.
Some of this rise of the last 2 years is justified by the roughly 8% growth seen in NASDAQ’s revenues from 2017 to 2019, which translated into similar growth in Net Income.
While the company has had sluggish revenue and earnings growth over recent years, its P/E multiple has seen a significant increase. We believe the stock is unlikely to see an upside after the recent rally and the potential weakness from a recession-driven by the Covid outbreak. Our dashboard Why NASDAQ Stock moved 76% between 2017 and now has the underlying numbers.
NASDAQ’s P/E multiple changed from around 17x in 2017 to about 23x in 2019. While the company’s P/E is just below 28x now, there is a downside when the current P/E