30 July, 2007

The Time is Right to Invest in NYSE Euronext

You're a trader, investor, market-maker, whatever title suits you. It's virtually all identical to NYSE Euronext (NYX), since a lot of your trading action goes through them. This mortgage crisis has led stocks lower lately, but with it has also brought virtually record trading volumes to the exchanges. This is a very sustainable business, the business of running an exchange. More individuals are getting into the investing game each and every day and this type of organic growth bodes well for the future as the market, through the Internet, becomes more accessible to a next generation of investors.

The markets have always had the perception of being smug, and a game for the big boys on the floor of the exchange. Not anymore as any kid with an online trading account can bump shoulders with the heavyweights in the volatile after-market. As the world expands, its only getting smaller. This is the type of philosophy management has taken with NYX. Their purchase of Euronext, which provides exchange services in the UK, Belgium, France, The Netherlands and Portugal, is a big step in consolidating trading worldwide. It's a lofty goal, but management is focused on this growth through acquisition mind state.

This stock was a Jim Cramer favourite on his CNBC Mad Money show and he even called it his growth stock of the year in the past. The market wasn't kind to the Old SkeeDaddy as NYX was pushed down from a high of $112 to it's current valuation in the high $70s. However, I think now is the time to really jump into this company as it prepares to announce quarterly earnings on Aug. 2nd. And hey it was just upgraded by Banc Of America from Sell to Neutral!
All the abuse that Jim takes over his daily changing picks, he's still right more times than he is wrong and the work he does to get the investing message out there has to be commended, even if NYX didn't turn out to be a star over the last 8 months. The fundamentals have not changed for this growth business and with a forward P/E in the 20s it is certainly time to consider investing. In fact it might be one of the only times to get in before the company leaves those on the sidelines in the dust.

Analysts targets vary from $76 to $113, with an average of about $92 over the next 6-12 months. That's an average estimated upside of 18% return according to the professionals. The sentiment about the company is increasing and hey they even payed out a dividend last month.
Oh and the company just made $550Million from the sale of LCH Clearnet, its clearing house. This will allow the company more flexibility as it meets requirements and regulations in Europe.

Analysts estimate sales growth of over 116% this quarter, 122% next quarter and an even 100% for the year. This kind of growth from a company that runs stock exchanges? Yes, and the expansion plans will only continue for NYX as it will try to keep ahead of its major competitors here in North America and abroad. Add this to the fact that trading volumes have never been higher for the company than they have been over the last month and the prospects are bright for future upside earnings surprises and an appreciation in the stock as analyst after analyst will have no choice but to issue an upgrade.

I expect this cycle to begin as earnings are announced later this week. The old adage of "Invest in what you know and use" creeps up again. Chances are many companies you hold and trade are listed on the New York Stock Exchange.

Disclosure: Author is long NYSE


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Anonymous said...


Once again after crash Nifty has started going up. Now we suggest all rises should be used as an opportunity to exit old long positions.
This bull run will continue for few more days. Overall market is in bearish mood as in medium term its just a small rally due to short covering
and result season.

Happy Trading,


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