Nasdaq’s ongoing transformation seems to be paying immediate dividends.
Shares of Nasdaq (NDAQ 7.22%) were up 6% as of 12:20 p.m. ET on Thursday, according to data provided by S&P Global Market Intelligence.
Powered by impressive second-quarter results on Thursday morning, the company continued to show that it is quickly becoming much more than the Nasdaq exchange and indexes that it is famous for.
Nasdaq’s new look
Nasdaq spent $10.5 billion on the acquisition of risk management and regulatory software provider Adenza in 2023, reaffirming its ambitious intentions to help “police the financial markets.” Following this purchase, Nasdaq’s financial technology segment blossomed into a powerhouse that fights fraud and money laundering for its banking customers while also providing the regulatory and capital markets technology they need.
This matters in regard to today’s increase in share price because this unit grew by 79% in Q2 — or 16% without Adenza’s addition. Management set a 10% to 14% mid-term growth outlook for the financial technology unit recently at its investor day, so these results were better than expected so far.
With $3.1 trillion in money laundering and illicit flows occurring in 2023 — as well as $500 billion lost to scams and frauds — Nasdaq’s financial technology unit has a lengthy growth runway ahead of it. Furthermore, as the company’s 3,500 banking clients wrestle with ever-tightening regulations in an increasingly digitized world, Nasdaq is well positioned to become a key cog in the financial ecosystem.
On top of this, Nasdaq’s famous listing operations delivered its 42nd consecutive quarter of taking the most U.S. companies public, showing that it remains the go-to destination for initial public offerings (IPOs).
Trading at 23 times free cash flow (FCF), despite its FCF margin dipping as it integrated the Adenza acquisition, Nasdaq looks attractively priced considering its importance to the financial industry.
