Redburn Atlantic upgrades Nasdaq on upside from fintech strategy

Investing.com --Redburn Atlantic upgraded Nasdaq Inc to “Buy” from “Neutral” saying the recent pullback in the exchange operator’s shares offers a compelling entry point for long-term investors, underpinned by resilient recurring revenues and emerging opportunities in financial technology.

Nasdaq shares came under pressure in March amid broader weakness in technology stocks and recession concerns. However, Redburn said the market’s fears are overblown, especially regarding the company’s sensitivity to IPO cycles and ETF flows.

The sell-off has created a mispricing.

“Nasdaq’s beta to the market is typically less than feared, opening the door to alpha-generating opportunities,” analysts say. 

Redburn set a price target of $91, implying a 25% upside from current levels.

While noting near-term risks in Nasdaq’s Index and Listings businesses, Redburn argued that structural growth drivers and fee amortization smooth out volatility more than investors currently appreciate.

Analysts believe the downside risk from the Index business is likely less than feared as Nasdaq’s revenue from IPO listings is spread over multiple years, reducing the impact of short-term fluctuations.

More importantly, the firm highlighted upside potential from Nasdaq’s growing fintech ambitions, particularly in scaling its software solutions and monetizing proprietary data to offer deeper analytics for clients.

Nasdaq has pivoted in recent years to become more of a financial technology platform provider, acquiring software and analytics firms to reduce its reliance on traditional transaction-based revenue.

Redburn said the company is in the early stages of monetizing this transformation, and success could re-rate the stock over time.

Despite trimming its target price by 2% to reflect broader market concerns, the firm said Nasdaq's current valuation offers a favorable risk/reward skew.