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Nasdaq (NASDAQ:NDAQ) stock gained 1.0% in Wednesday premarket trading after Bank of America Securities double-upgraded the exchange and market data company to Buy from Underperform on its wide moat and high-growth software and information service businesses.
Even though only 19% of Nasdaq’s (NDAQ) 2024 revenue came from trading, the stock is still trading in line with its lower-growth traditional peer group of exchanges, analyst Craig Siegenthaler wrote in a note to clients. That sets the stage for a potential re-rating of the stock, he added.
Meanwhile, the trading business is also poised to benefit as BofA forecasts a rebound in IPO listings after the U.S. presidential election.
“After two years of mid-single-digit EPS growth in 2022-2023, we look for EPS to accelerate to 10%-15% in 2025-26,” Siegenthaler said.
The company’s Solutions segment now makes up 78% of revenue, making a compelling case in valuation as its information services peers such as S&P Global (SPGI), Moody’s (MCO), and MSCI (MSCI) trade at 30x 2026E earnings and have “a fair amount of overlap” with Nasdaq’s Capital Access Platforms segment.
Its FinTech segment, comprising 36% of group revenue with management guiding toward 10%-14% over the medium term, can be compared with software companies such as Jack Henry (JKHY), nCino (NCNO), and MeridianLink (MLNK), which trade at 30-40x EPS, vs. NDAQ’s 21x 2026 EPS.
Applying a 25x earnings multiple to BofA’s 2026 EPS estimate for Nasdaq (NDAQ), Siegenthaler increased its price target to $90 from $53, which used a 15x multiple.
BofA’s Buy rating contrasts with the SA Quant rating of Hold and aligns with the average Wall Street rating, both at Buy.
