Tuesday, Morgan Stanley upgraded shares of Nasdaq OMX Group Inc. (NASDAQ:NDAQ) stock from Equalweight to Overweight and increased the price target to $80 from $59. The firm highlighted the company's ongoing transformation towards higher quality, recurring revenue streams as a key factor for the upgrade. This strategic shift is expected to reaccelerate growth and drive multiple expansion for the stock exchange operator.
The analyst at Morgan Stanley identified Nasdaq as a Top Pick, a status previously held by another company, which continues to be rated Overweight. The new price target suggests a 28% upside potential for the company's shares, reflecting a positive outlook on the financial services corporation's future performance.
Morgan Stanley's upgrade is based on a sum-of-the-parts (SOTP) valuation approach, taking into account comparable companies within the information services sector. This method has led to the determination of the $80 price target and underscores the firm's confidence in Nasdaq's growth trajectory.
The bullish stance on Nasdaq's transition emphasizes the expected benefits of a more predictable and stable revenue model. The company's move to diversify its revenue sources and focus on areas with recurring income is anticipated to contribute significantly to its valuation.
InvestingPro Insights
Building on the positive outlook from Morgan Stanley, InvestingPro data underscores the financial robustness of Nasdaq OMX Group Inc. (NASDAQ:NDAQ). With a market capitalization of $36.03 billion, Nasdaq trades at a forward P/E ratio of 29.21, signaling investor confidence in its earnings potential. Even as analysts anticipate a slight sales decline in the current year, the company's gross profit margin remains strong at 64.23% for the last twelve months as of Q4 2023, showcasing the efficiency of its operations.
InvestingPro Tips highlight Nasdaq's commitment to shareholder returns, with the company having raised its dividend for 12 consecutive years and maintaining dividend payments for 13 consecutive years. The firm's stock is also trading near its 52-week high, reflecting a large price uptick over the last six months of 25.91%. These metrics, coupled with a robust return on assets of 3.98%, paint a picture of a company that is not only profitable but also rewarding to its investors.
For readers looking to delve deeper into Nasdaq's financial health and prospects, additional InvestingPro Tips are available on the platform. There are 9 more tips that can provide further insights into the company's performance and future outlook. To access these tips and more detailed analytics, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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