NASDAQ Earnings Preview: Recovery In Trading Volumes Likely To Boost Top-Line

NASDAQ ( NDAQ ) will announce its Q4 earnings on Tuesday, January 31st. The company's revenues grew by about 7% in the first nine months of 2016, and the consensus estimates suggest higher growth for the fourth-quarter. The year 2016 wasn't very impressive for trading as investors exhibited inclination towards lower-risk assets amid deteriorating financial conditions during the first half of the year. However, the company's focus on growing its non-trading segment, along with growing demand for data-related products, helped it remain resilient. Moreover, the last quarter saw a recovery in trading volumes, with increased volatility in the stock market resulting from the recently concluded U.S. presidential elections and improved GDP and employment rates. However, declining market share is likely to offset the growth in trading commissions. This is due to tough competition from new exchanges such as IEX, and the fact that the company's offerings remain limited to equity products.

Non-Transaction Businesses Are Likely To Drive Growth

Nasdaq's non-trading business lines, including information, technology and listing services, generate around 40% of the overall revenues. These businesses grew over 10% in the first 9 months of 2016. There has been a recent series of acquisitions that have strengthened the existing technology and information services segments. As such, we believe the increased uptake of products will aid the revenue growth. Moreover, the in-house products have attracted a lot of customers since their launch early in the year. These include IR Insights, which is capable of incorporating news, recommendations, and trackers on a single platform, and Nasdaq Influencer, through which marketing professionals from different companies can connect with veterans in their industry to promote their brand and share insights and recommendations,

Increased Volatility Shoots Trading Volumes

The market services segment, which contributes around 60% of Nasdaq's overall revenues, grew around 4% in the first nine months of 2016. The trading volumes recovered in the last quarter and this is likely to boost the segment's revenues. The acquisition of ISE has secured NASDAQ the leading position in equity options trading . With around 40% market share in the U.S., the volumes have gone up by 50% year over year.

Cash equity volumes grew nearly 2% yin Q4 2016 compared to Q4 2015, aided by the increased volatility in the stock market.

Fixed income trading volumes also saw 5% growth. The growth in trading volumes across all product line is likely to benefit the market services revenue.

Please refer to the full Trefis analysis for Nasdaq

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics

Stocks US Markets Investing

Latest Markets Videos


Trefis is an interactive financial community structured around trends, forecasts and insights related to some of the most popular stocks in the US. Whereas most finance sites simply give you the facts about where a stock has been and what a company has done in the past, Trefis focuses entirely on the future.

Learn More