Deutsche Bank: Owning Nasdaq OMX Group, Inc. Could Reward Investors In The Long-Term

On Thursday, Brian Bedell of Deutsche Bank released a year-end strategy report on Brokers, Asset Managers and Exchanges. The analyst favors owning shares of Nasdaq OMX Group, Inc. (NASDAQ: NDAQ) along with InterContinental Exchange (NYSE: ICE).

The two exchanges offer investors "earnings per share growth/valuation stories though still benefiting from higher volumes."

"We are constructive on Nasdaq's progress over many years in creating a lower-risk, high-recurring revenue business model with solid execution, especially in cost management," Bedell wrote. The analyst said that the exchange continues to gain traction among investors following an improvement in the company's price to earnings ratio.

Bedell favors owning shares of Nasdaq OMX following a recent pullback in the company's valuation versus its peers. Additionally, the analyst argues that a slow intermediate-term revenue growth trajectory is priced into the valuation. Finally, a potential acquisitive growth strategy may restrain capital return ratio below some of its peers, but the company could benefit from “attractive tangential revenue” as well as expense synergy opportunities.

Bottom line, Bedell believes that in the longer term, management's solid execution history should reward investors with a higher valuation.

Shares were upgraded to Buy from Hold with a price target raised to $49 from a previous $46.