RBC Capital analyst Ashish Sabadra initiated coverage on Nasdaq Inc (NASDAQ:NDAQ) with an Outperform rating and a price target of $88.
The price target reflects higher growth prospects and a higher degree of recurring revenue mix following the acquisition of Adenza, and growth in Solutions revenues, the analyst says.
Nasdaq’s peer group is trading at an average of 21 times fiscal 2026 earnings per share (EPS). Given several secular tailwinds in Nasdaq’s business, improved recurring revenue mix, and earnings growth, Sabadra noted that Nasdaq should trade above the group’s average.
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Nasdaq’s Solutions target a sizeable addressable market ($31 billion Serviceable Available Market and $79 billion Total Addressable Market) with limited penetration (~8.5% of SAM) and growing at an accelerated pace of 8%+ driven by secular trends, namely Cloud and Digital Transformation and GenAI adoption, Sabadra said.
According to the analyst, Nasdaq’s leading solutions should grow faster than the market, delivering 8%- 11% Solutions revenue growth over the mid-term.
He expects Solutions revenues to account for over 80% of total revenues in the mid-term, delivering 6% to 9% total revenue growth.
AxiomSL and Calypso have significant cross-sell and up-sell opportunities (more than $100 million by year-end 2027) from their “land and expand” strategy, driven by increased regulations, geographic expansion, product penetration, and product upgrades, delivering high-single-digit to double-digit revenue growth over the mid-term for Regulatory and Capital Market Technology, as per Sabadra.
Accelerated growth in Verafin, driven by new client wins and expansion into Tier 1 and 2 banks, should deliver robust mid-20% growth in Financial Crime Management, he said.
Overall, the analyst expects Nasdaq to deliver a potential upside to mid-term revenue growth of 10%- 14% in Financial Technology while remaining relatively resilient in a hard landing scenario.
Sabadra said the shift from active to passive focusing on U.S. growth stocks should likely drive an upside to the Index’s mid-single-digit to high-single-digit mid-term revenue growth.
The capital market recovery in fiscal 2025-2026 bodes well for Data and Listing Services and IR solutions within Workflow & Insights. The portfolio rationalization should help accelerate the growth of workflow and insights from high-single-digit to low double-digit over the mid-term, he added.
According to Sabadra, Adenza acquisition cost synergies should result in expense growth below the mid-term target of a 5% to 8% increase annually, driving robust margin expansion. Lastly, robust free cash flow should help de-lever below 3.3 times by the end of fiscal 2025.
Sabadra projected third-quarter revenue of 1.16 billion and EPS of 68 cents.
Price Action: Nasdaq stock is up 0.28% at $72.76 at last check Friday.
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