With the 2024 U.S. presidential election approaching, investors are on edge, anticipating how potential policy changes could shake up the markets. However, while electric vehicle (EV) stocks and steel producers are drawing plenty of focus, one stock with potential election-related upside that many investors might be overlooking is Nasdaq, Inc. (NDAQ), the powerhouse behind the Nasdaq Stock Market.
According to Bank of America Securities analyst Craig Siegenthaler, a recovery in IPO listings after the presidential election could be a boon for the exchange operator. But even more compelling, said the analyst in his recent double-upgrade of the stock, is the fact that NDAQ is still valued like a bargain-priced exchange operator, even as the trading business accounts for only 19% of its revenue.
About Nasdaq Stock
New York-based Nasdaq, Inc. (NDAQ), founded in 1971, is a tech titan in the financial world, with a market cap of $41.2 billion. Best known as the world’s first electronic stock market, Nasdaq offers trading and clearing services for multiple asset classes.
Nasdaq operates through three key segments. Its Capital Access Platforms business sells and distributes real-time market data and analytics, while Financial Technology features tools like Verafin for detecting financial fraud and AxiomSL for risk management. The Market Services segment handles the legacy exchange and marketplace businesses.
Over the past 52 weeks, NDAQ has rallied 39.5%, including a recent sprint of nearly 21% in just the past three months. The stock hit a new all-time high of $74.17 on Sept. 4.
At 26x forward earnings, NDAQ stock is priced right in line with peers like Intercontinental Exchange, Inc. (ICE) - but that undervalues Nasdaq’s business model, argues BofA’s Siegenthaler. Noting that most of the company’s revenue comes from its higher-growth FinTech and Capital Access Platforms businesses, the analyst argues that NDAQ stock is due for a re-rating.
Nasdaq’s Dividend History
In Q2, Nasdaq returned $138 million to shareholders through dividends and repurchased $58 million in stock, all while wiping out a $174 million term loan. As of June 30, $1.8 billion was available under the current buyback authorization.
Nasdaq’s commitment to rewarding shareholders is evident, having steadily increased its dividend for 11 years. On July 25, Nasdaq’s board approved a quarterly dividend of $0.24 per share, payable to shareholders on Sept. 27.
The annualized dividend of $0.96 per share translates to a 1.34% forward dividend yield. Plus, with a 33.2% dividend payout ratio, the company is rewarding shareholders while still retaining plenty of earnings to fuel growth.
Nasdaq Rises After Q2 Earnings Beat
On July 25, NDAQ stock rose 7.2% after the company impressed Wall Street with its stronger-than-forecast fiscal Q2 earnings report. Revenue grew 25% annually to $1.16 billion, while adjusted EPS dipped 3% year over year to $0.69, edging past projections by 7.8%. Solutions revenues jumped 34% to $901 million during the quarter.
After acquiring Adenza for $10.5 billion in 2023, Nasdaq has transformed its FinTech segment into a fraud-fighting and regulatory powerhouse. This investment paid off, with the unit’s revenue soaring 79% – 16% if Adenza is excluded. This surge outpaced the company’s mid-term growth forecast of 10% to 14%, showing that Nasdaq’s strategy is hitting the mark.
Nasdaq also marked its 42nd consecutive quarter as the top choice for U.S. companies going public. In Q2, it boasted a 72% win rate of eligible operating companies, with 31 IPOs raising over $3 billion.
Operating cash flow totaled $460 million, pushing its deleveraging plan forward. As of June 30, it was sitting on a solid $440 million in cash and equivalents.
Analysts tracking Nasdaq project the company’s profit to dip 2.8% year over year to $2.74 per share in fiscal 2024, before recovering to $3.10 in fiscal 2025.
What Do Analysts Expect for NDAQ Stock?
On Sept. 4, BofA issued Nasdaq stock a double upgrade, as analyst Siegenthaler raised his rating all the way from “Underperform” to “Buy.” The analyst praised the exchange and market data company’s wide moat, along with the high growth potential in its software and information services businesses.
"After two years of mid-single-digit EPS growth in 2022-2023, we look for EPS to accelerate to 10%-15% in 2025-26," he wrote in a note to clients.
Siegenthaler also raised his price target on NDAQ to a new Street-high of $90, based on a forward earnings multiple of 25x, up from the prior 15x. That implies expected upside of 25.4% from Tuesday’s close.
NDAQ stock has a consensus “Moderate Buy” rating overall. Out of the 17 analysts covering the stock, eight suggest a “Strong Buy,” two recommend a “Moderate Buy,” and the remaining seven analysts have a “Hold” rating.
Following BofA’s upgrade, there are now zero “Sell” ratings for NDAQ.
