We issued an updated research report on MarketAxess Holdings Inc. MKTX on Jun 2, 2015.
MarketAxess has been enhancing its operating leverage through various organic and inorganic growth initiatives over the past few years. The company has strengthened its trading platform through a series of new MarketAxess Open Trading solutions protocols. Alongside, the expansion of the Open Trading strategic alliance in association with BlackRock Inc. BLK into the European credit markets in Jan 2015 is expected to help in improving liquidity and reduce transaction expenses. The strategic acquisitions and alliances have also been boosting the information and post-trade services revenues.
Changing market dynamics over the recent years have positively impacted MarketAxess' commissions, which are its primary revenue drivers. We expect organic growth strategies, a compelling economic market model and diversified product portfolio to broaden the scope of volumes growth further. Additionally, the company enjoys a strong financial position that paves the way for accelerated capital deployment.
However, MarketAxess’ has been witnessing increased expenses owing to high employee compensation and benefits, coupled with other operating expenses. The company requires prudent expense-management initiatives to prevent any significant pressure on margins.
Moreover, increased competition due to the emergence of new entrants is reducing market share. This includes both product- and price-based competition, which has been rising continuously due to direct bond trading between brokers and dealers. Also, MarketAxess bears the brunt of stringent regulations that have recently been proposed and imposed in the U.S. and Europe. These rulings have been weighing on capital expenditures.
In Apr 2015, MarketAxess reported first-quarter earnings that surpassed the Zacks Consensus Estimate and improved year over year on high volumes across its core products.
MarketAxess currently carries a Zacks Rank #3 (Hold). Better-ranked stocks from the finance sector include Qiwi plc QIWI and Regional Management Corp. RM. Both stocks sport a Zacks Rank #1 (Strong Buy).
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