Citi has reaffirmed its Buy rating on MarketAxess (NASDAQ: MKTX), a leading electronic trading platform for fixed-income securities, with a steady price target of $310.00.
The firm anticipates a positive market reaction to the forthcoming release of MarketAxess's monthly data for August, expected on September 5th. According to Citi, August is on track to demonstrate robust credit volume performance.
The optimism for MarketAxess's short-term prospects is rooted in several market conditions that are likely to play in the company's favor. The firm projects that MarketAxess will gain market share in investment grade (IG) and high yield (HY) credit due to a combination of lower issuance and wider bid-ask spreads, which often accompany higher credit spreads and market volatility.
Additionally, increased exchange-traded fund (ETF) activity and a decline in private trading (PT) are also expected to contribute positively to MarketAxess's market share.
Emerging markets (EM) trading activity has seen an uptick as well, which could further bolster MarketAxess's performance. Citi also suggests that the firm's Fixed Income Pricing (FPM) service stands to benefit from longer duration in IG and a surge in HY activity.
These factors combined lead Citi to believe there is a clear upside potential to the consensus earnings estimate of $1.61 for the third quarter of 2024.
Looking beyond the immediate future, Citi notes potential for additional positive impacts stemming from the introduction of new trading tools and analytics by MarketAxess. These enhancements, however, are viewed as opportunities materializing in 2025, indicating a longer-term growth trajectory for the company.
In other recent news, MarketAxess posted a 10% increase in total revenue for the second quarter of 2024, amounting to $198 million. This growth was fueled by robust commission revenue and the successful integration of Pragma, a newly acquired company.
The firm's diluted earnings per share reached $1.72, and a new share repurchase program valued at $200 million was announced.
These recent developments also include a rise in information services and post-trade services revenue by 8% and 10%, respectively. MarketAxess is also expanding its market share with the global launch of the X-Pro trading platform, targeting growth in fixed income trading revenue, and enhancing client experiences.
However, the company anticipates an additional $10 million in expenses in the second half of the year, mainly for marketing, travel, and technology.
InvestingPro Insights
With Citi's optimistic outlook on MarketAxess (NASDAQ: MKTX), investors may also find value in recent metrics and analysis from InvestingPro. The company's commitment to shareholder returns is evidenced by its track record of raising dividends for 10 consecutive years, and it has maintained dividend payments for 16 consecutive years, highlighting a stable financial policy. Analyst sentiment appears to be buoyant, with 4 analysts having revised their earnings upwards for the upcoming period, suggesting that the positive trends noted by Citi may already be reflected in broader market expectations.
From a valuation perspective, MarketAxess is trading at a high earnings multiple, with a P/E ratio of 34.15 and a Price/Book ratio of 6.75, indicating that investors are willing to pay a premium for the company's future growth prospects. This is further supported by the company's strong return over the last three months, with a price total return of 18.95%. For those interested in exploring further insights, InvestingPro offers additional tips on MarketAxess, available at their dedicated InvestingPro page.
InvestingPro Data highlights MarketAxess's solid financial footing, with a market capitalization of $8.97 billion and a robust gross profit margin of 62.5% for the last twelve months as of Q2 2024. The company's revenue growth of 6.07% during the same period underscores its ability to expand in a competitive landscape. These financial health indicators complement Citi's analysis and provide investors with a comprehensive view of MarketAxess's performance and potential.
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