On Tuesday, BofA Securities revised its price target for Nasdaq OMX Group Inc. (NASDAQ:NDAQ) shares, decreasing it to $54 from the previous $55 while maintaining an Underperform rating.
The adjustment follows a reassessment of the company's financial technology revenue projections due to an expected slowdown in Nasdaq's Annual Recurring Revenue (ARR) growth for the first quarter of 2024.
The firm adjusted its earnings per share (EPS) estimates for Nasdaq to $0.69 for the first quarter of 2024, an increase from the previous $0.68 estimate. The full-year EPS forecasts for 2024 and 2025 have also been updated to $2.91 and $3.20, respectively, from the earlier $2.88 and $3.22.
This recalibration is based on a more conservative outlook for Nasdaq's financial technology sector growth, which is now projected to fall short of the company's medium-term target range of 10-14% for 2025/2026.
Despite the downward adjustment, BofA acknowledged that Nasdaq's flagship NDX index rose by 9% in the quarter. Additionally, the firm projects the strongest net flows in two years based on intraquarter data. These positive indexing results, along with expected expense synergies, particularly from the integration of Adenza, have led to the raised EPS estimate for the first quarter.
However, the potential benefits from strong indexing performance and expense synergies are anticipated to be partially offset by the reset of the CME accelerator, which is estimated to be a $9 million headwind for Nasdaq. BofA also noted that Nasdaq appears to be ahead of its guidance regarding Adenza expense synergies.
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