MKTX - Nasdaq CBOE ICE and TradeWeb nab Buy ratings as Rosenblatt starts coverage

Rosenblatt Securities analyst Andrew Bond started coverage of financial exchanges Wednesday by issuing Buy ratings on Nasdaq ( NASDAQ: NDAQ ), Intercontinental Exchange ( NYSE: ICE ), Cboe Global Markets ( BATS: CBOE ), and Tradeweb Markets ( NASDAQ: TW ). MarketAxess ( NASDAQ: MKTX ) is his lone Sell rating in the sector.

Comparing Tradeweb ( TW ) with MarketAxess ( MKTX ) in the electronic fixed income subsector, "only TW has built an all-weather trading business that can generate mid-high teens EBITDA growth in this environment, which is the highest in the space," Bond wrote in a note to clients. Both companies are expected to benefit from fixed income markets electronification, he said, but both stocks are also trading at the highest multiples in the exchange group.

Bond likes the cross-functionality between TW's product suite as a key competitive advantage. Meanwhile, MKTX's market share and overall performance hasn't kept up with Street expectations, he said. Tradeweb ( TW ) shares have edged down 0.4% to $74.10 in midday trading; Bond's price target is set at $91, while MarketAxess ( MKTX ) has fallen 2.6% to $270.43; price target set at $231.

For CBOE ( CBOE ), Bond likes its diverse business mix across assets and geographies. Its focus on building up its retail base differentiates the company from other exchanges, he notes. "In a sector defined by significant cash flow generation and a high degree of flexibility around capital allocation strategy, we believe CBOE has found the right balance to maximize shareholder returns." Price target is $153. CBOE stock has gained 1.8% to $122.13.

While Nasdaq's ( NDAQ ) leading positions in U.S. equities market and U.S. options exchanges don't provide the same moat as vertically integrated derivatives platforms, "NASDAQ's listings and corporate services provide what we believe to be a sustainable competitive advantage around its core trading business," the analyst wrote. He sets a $241 price target. NDAQ has gained 0.8% to $193.13.

Bond considers Intercontinental Exchange's ( ICE ) energy business as underappreciated as it wins share from CME Group ( CME ) across core markets and shifts to alternative energies. Furthermore, he sees the company's mortgage-related business as a winner in the long run. "ICE's mortgage transition has created some market concern as rates rise, but we believe recurring revenue growth will continue to outweigh cyclicality over time and upside across other businesses more than offsets risk," the analyst wrote. His price target is $164 on the stock. ICE shares have slipped 0.4% to $110.63.

SA's Quant system, which historically outperforms the market, has Sell ratings on Tradeweb ( TW ), Intercontinental Exchange ( ICE ) and MarketAxess ( MKTX ). On Nasdaq ( NDAQ ) and CBOE ( CBOE ), it has Hold ratings, as seen in this Peer Comparison

In the past year, MKTX shares have significantly underperformed the S&P 500 and TW, ICE, NDAQ, and CBOE as seen in this graph.

SA contributor also compared MarketAxess ( MKTX ) with Tradeweb ( TW ); see which one came out on top

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