Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Tuesday, UBS analyst Alex Kramm adjusted the price target for Nasdaq OMX Group Inc. (NASDAQ:NDAQ) shares, lowering it to $76.00 from the previous $89.00, while the Neutral rating was maintained. The revision followed the release of Nasdaq's March metrics, which prompted an increase in UBS's first-quarter 2025 earnings per share (EPS) estimate to $0.77, up from $0.76, and slightly above the consensus of $0.76. This upward adjustment is attributed to heightened trading in U.S. options and equities, along with a stronger performance in the index business, particularly in derivatives volumes. According to InvestingPro data, the stock has fallen nearly 11% in the past week, with its RSI indicating oversold territory. The company, currently valued at approximately $40 billion, trades at a P/E multiple of 35.8x.
However, this positive adjustment is tempered by reduced expectations for the Capital Markets Tech business, based on recent comments from management. In addition, UBS has revised its forward estimates downward due to recent market performance, which has impacted the revenue outlook for Nasdaq's index business. The new forecast anticipates a 5% year-over-year increase in index revenue for the fiscal year 2025, a significant decrease from the previous estimates of 14% growth and the 33% growth experienced in fiscal year 2024. InvestingPro analysis reveals that analysts expect an overall revenue decline this year, though the company maintains strong profitability with a gross margin of 63%.
The revised outlook also includes a new projection for organic solutions growth, which now stands at 7% for fiscal year 2025. This is below the previously targeted medium-term range of 8-11%. Despite the recent sell-off in Nasdaq shares, Kramm expressed caution, citing the downward revision in growth outlook, dampened expectations about the reopening of IPO markets, and the unproven nature of new FinTech businesses. Kramm noted interest in the share price decline but indicated that the current circumstances do not support a more positive investment stance. With earnings scheduled for April 24, investors can access comprehensive analysis and 10+ additional ProTips through InvestingPro's detailed research report, which provides deeper insights into Nasdaq's valuation and growth prospects.
In other recent news, Nasdaq OMX Group Inc. reported several significant developments. Morgan Stanley (NYSE:MS) downgraded Nasdaq's stock from Overweight to Equal-weight, reducing the price target to $74 from $96, citing concerns over the growth outlook of its Solutions business. Similarly, Citi adjusted its price target for Nasdaq to $75 from $84, maintaining a Neutral rating and highlighting potential challenges in market conditions and extended sales cycles. Raymond (NSE:RYMD) James, however, maintained an Outperform rating on Nasdaq, with a steady price target of $84, emphasizing the company's diversified business model and growth potential.
Moody's upgraded Nasdaq's long-term issuer and senior unsecured debt ratings to Baa1 from Baa2, reflecting improved debt leverage and a stable outlook supported by strong recurring revenues. Additionally, Nasdaq announced the establishment of a new regional headquarters in Dallas, Texas, reinforcing its commitment to the Southeast U.S. market. This expansion aims to support over 200 companies listed on Nasdaq in Texas, with a combined market capitalization of $1.98 trillion as of December 2024. The new headquarters will focus on enhancing client relationships and addressing regulatory challenges in the region.
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