Why Nasdaq’s stock price soared 18.6% in July

What happened

Nasdaq Inc.. (NASDAQ:NDAQ)the company, which owns the Nasdaq Composite Index and the Nasdaq Stock Exchange, had a better month than the index, according to S&P Global Market Intelligence.

Nasdaq Inc. returned 18.6% in July, beating the S&P500, which rose 9.1% for the month, and the Nasdaq Composite, which gained 12.4% in July. The company’s stock is down 15% year-to-date, beating the Nasdaq Composite, which is down 21% so far in 2022.

So what

The main catalyst for Nasdaq in July was its second-quarter earnings report, which showed a 10% year-over-year revenue increase to $1.5 billion and a 6% increase in net revenues at $893 million. Additionally, adjusted earnings per share (EPS), removing prior year gains from disposals, increased 9% year over year to $2.07.

All four of its business segments reported revenue gains, led by Market Technology (solutions for institutional investors in trading and settlement, and financial crime deterrence, among others), which grew 12%.

Enterprise platforms – encompassing index listing services, as well as investor relations and ESG (environment, social, governance) services – were also up 12% year-over-year.

The largest segment, Market Services, which includes exchange trading revenue, grew 11%. Investment Intelligence, which generates revenue from data and market intelligence and licenses its indices, reported an 8.5% year-over-year revenue increase.

The growth of its business outside of Market Services provides Nasdaq with not only multiple revenue streams and growth opportunities, but also diversity in the types of revenue it generates. The company increased its amount of recurring revenue from subscriptions, particularly within the Market Technology segment, through its software-as-a-service (SaaS) offerings. SaaS revenue grew 12% year over year and represents 35% of recurring revenue.

Now what

The other big driver for the Nasdaq was the completion of a planned 3-to-1 split. It was first announced in April and approved in July. After August 12, each shareholder will receive two additional shares, currently about $177 per share, for each share they own. The new shares will be distributed on August 26 and the stock will begin trading at the new split-adjusted price on August 29.

The idea is to make the stock more accessible to more investors at a lower entry price, thereby increasing liquidity. The market reacted to the move with approval, as the price jumped sharply on the news when it was released on July 20. There are a bunch of high-profile stock splits coming up on the Nasdaq exchange, and that’s usually good for Nasdaq Inc. because it creates more trading activity.

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Dave Kovaleski has no position in the stocks mentioned. The Motley Fool recommends the Nasdaq. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Karen J. Nelson