While you do not need to be a professional investor to be aware of the NASDAQ stock exchange, did you know that the parent company of the second-largest stock exchange in the world is more than just that?
Not only does NASDAQ, Inc. boast 3 stock exchanges in the US and 7 in Europe; it has been making tech-based moves into the more lucrative investment intelligence and market technology segments too!
Does this make NASDAQ a potent money-making investment? Let’s break it down 👇
Nasdaq Overview:
With Nasdaq hitting our last price target, the clear answer to the above question is yes.
But now we're asking ourselves, "How much upside is there?"
The short answer is another 25% in the short term. But in the longer term we think there is even more upside coming.
Nasdaq Outlook:
- Nasdaq just launched a major partnership with Amazon Web Services (AWS) to build a massive generation of products using their cloud-enabled infrastructure for the capital markets. While this is definitely a win for Amazon, the bigger story is the investment Nasdaq is making going forward. This is because while they embraced the cloud beforehand this partnership this truly sets the stage for a massive plan forward. This opens up new revenue opportunities for the fintech company and finally gives them leverage over their margins. With faster network speed
- With this investment, Nasdaq will be able to leverage faster network speeds and offer additional products! They will now be able to cater more freely to high frequency traders! Over time this also leads favorably into enhanced data analysis via this new cloud based service - another form of products they could start building around. While this will take years to materialize this long overdue transition will allow them to now only increase revenue but also diversify their product offering and jump into new markets! data analysis, which may present additional opportunities for NDAQ to develop and monetize data offerings
- Past this partnership Nasdaq is starting to get more and more involved in the ESG space. We've written about this before but ESG investments are a fulfilling prophecy at this point. As more and more companies become required to invest here, the assets being poured into these types of companies literally HAVE TO HAPPEN. For Nasdaq this has them targeting their ESG revenue line items to increase by 10x by the year 2025. While the total size is still relatively small ($50M) compared to their total revenue output, the growth here cannot be ignored and should continue to pour in additional revenue for them over the next few decades!
Our Take:
Some critics have remarked that the growth generated by NASDAQ might not be sustainable as the economy cools down, which would translate to low upside potential; we, however, beg to disagree. We see the above contributing to sustained growth for the company over the next several years!
In summary we see their investment in the cloud, investments in ESG and investments in data leading the way going forward. This should allow them to hit all of their projections will growing recurring revenue and being able to increase margins.
In a world that continues to value recurring revenue more and more, this is a key takeaway that this will continue in perpetuity for the company!
Price Target: $250 (20% Upside)
Current Price: $199
Rating: Overweight
Risk/Reward: Medium/Medium
Target Date: 9-12 Months
Ticker: NDAQ
Market Cap: $33B
Dividend Yield: 1.09%