On Tuesday, MarketAxess Holdings Inc. (NASDAQ:MKTX) received an upgraded stock rating from Morgan Stanley, transitioning from Equal-weight to Overweight. The firm slightly reduced the price target to $263 from the previous $264. According to InvestingPro data, the company maintains strong financial health with a GOOD overall score, supported by robust cash flows and liquid assets exceeding short-term obligations. Three analysts have recently revised their earnings estimates upward for the upcoming period. The revision by Morgan Stanley analysts is underpinned by a belief in the robustness of MarketAxess's earnings forecast, particularly in the context of a macroeconomic environment that is increasingly pointing towards a recession. This scenario is expected to drive higher corporate bond trading volumes as investors adjust their portfolios and prioritize higher-quality investments.
The analysts anticipate that the widening of credit spreads and heightened volatility will stimulate trading activity. This, in turn, is likely to enhance the valuation of MarketAxess's All-to-All liquidity pool, potentially increasing its trading volumes and market share. The company's recent performance shows promising momentum, with revenue growth of 8.58% in the last twelve months. Discover more detailed trading metrics and exclusive insights with InvestingPro, which offers comprehensive analysis through its Pro Research Reports. Morgan Stanley has revised their volume outlook upwards, now expecting a year-over-year average daily volume (ADV) growth of 21% and 16% in high-grade credit for 2025 and 2026, respectively, and a 15% growth for both years in high-yield credit.
Despite the positive outlook on trading volumes, the analysts also foresee a decrease in fee capture, projecting an 8.5% compression in 2025 before a modest expansion of 1.6% in 2026. This is attributed to a shift towards lower-fee products and a shorter duration across the trading platform. Consequently, the firm's earnings per share (EPS) forecast is adjusted to a slight increase of 1% in 2025 and a decrease of 1% in 2026. Nonetheless, these figures remain 6% and 8% above consensus estimates for the respective years.
Morgan Stanley's updated stance on MarketAxess reflects a nuanced perspective that balances the expected increase in trading volumes with the potential impact of changing fee structures and product mixes. The firm's analysis suggests a cautiously optimistic view of MarketAxess's performance in the face of evolving market conditions. InvestingPro analysis indicates the stock is currently trading below its Fair Value, with the next earnings report scheduled for April 16, 2025. The company maintains a P/E ratio of 26.28, reflecting market expectations for future growth.
In other recent news, MarketAxess Holdings Inc. reported record trading volumes for March 2025 and the first quarter, with the total average daily volume (ADV) for March reaching $46.5 billion, a 46% increase from the previous year. Credit trading showed significant growth, with a 20% year-over-year increase in total credit ADV for March. Despite these impressive figures, the company noted a decline in total credit variable transaction fees per million due to product and protocol mix. UBS analyst Alex Kramm adjusted the price target for MarketAxess to $295, maintaining a Buy rating, while Citi analyst Chris Allen reiterated a Buy rating with a $250 price target. UBS increased its first-quarter 2025 earnings per share forecast for MarketAxess to $1.81, reflecting higher-than-expected credit transaction fees. However, Keefe, Bruyette & Woods maintained a Market Perform rating, citing a significant drop in MarketAxess's electronic share from over 80% in 2018 to less than 50% today. UBS also expressed confidence in MarketAxess, acknowledging the challenges but recognizing its role in the transition to electronic trading platforms. These developments highlight MarketAxess's strategic initiatives and its position within a competitive market landscape.
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