Now we have a uniformly speculative thought: take stocks of the Tradeweb Markets electric bond trading platform (Nasdaq: TW), to earn income from the growth of her business.
Growth potential and duration : twenty percent for 20 Months; eleven percent a year for fifteen years.
Why stocks can go up: the company is moving in the right direction.
How do we act: take shares at the moment 81,62 $.
No guarantees
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And what is there with the author's forecasts
What the company makes money on
Tradeweb is a platform for trading securities, mostly debt, but there are also various derivatives and ETF.
In accordance with the annual report of the company, revenue is divided into subsequent segments:
- Transaction fees - 58,1 %. That, what the company collects from participating platforms for trading.
- Subscription - 22,6 %. Fixed fees for connecting customers to market data and for access to trading itself.
- Other fees - 18,3 %. This, in fact, extra trading fees.
- Mysterious "other" - one percent.
By types of customers, the company's revenue is distributed as follows::
- Institutional - 62,09% — banks, funds.
- Wholesale clients - 20,77 % – dealers and large participants in exchange trading.
- Retail clients - 8,55 % - personal faces.
- Market Data - 8,59 %. This is dedicated sales to designated customer types of trade data.
63,86 % the company's revenue comes from customers in the United States of America, 36,14 % — customers from unspecified other countries.
Arguments in favor of the company
Right direction. Even in the pre-pandemic thought on MarketAxess, I talked about, that the debt trading market is facing digitalization with the transfer of trading to an electric place. The epidemic has accelerated this trend, also led to an explosion of activity in the debt market. Companies and countries, how developed, and ever evolving, began to borrow funds in multitudes, and the financiers began to buy everything, which gave more 0% per annum. I don't see the circumstance, why in the short term the intensity of bond trading will decrease, - I think they will digitalize even more actively and increase turnover. What, actually, is already happening – and reflects in Tradeweb reporting in the best possible way. I think, Tradeweb's business may appeal to Mikhail Shardin.
This is not the market for you, to bargain. The company has a big P / E — 84,80, but in a broad context, it does not look overpriced. The capacity of the debt and derivatives trading market is as much as 6.3 trillion dollars. Tradeweb takes sixteen percent of this market, and its assessment in unconditional figures - capitalization of 18.95 billion dollars - looks completely even and predisposes to the upcoming growth.
Not only we like. Taking into account the above positive points, I consider the scenario with the acquisition of the company by someone larger as extremely possible. For instance, Intercontinental Exchange либо CME Group.
Positive experience. 8 August 2019, in anticipation of an improvement in the company's performance due to increased activity in the bond market, I took these shares for 45,49 $, and 4 June 2020 sold them for 62,97 $, Earning 38,5 % behind 10 Months.
What can get in the way
If you love honey, love the cold. The company has a huge number of competitors: previously specified MarketAxess, Algomi, IEX Group, trueEX, Bonds.com, OSIsoft, Airex. And there are still a bunch of small startups in the field of fintech, that are associated with the stock exchange. I'm afraid here first of all not that, that their presence is bad for Tradeweb's earnings. Difficulty faster in another: the opportunity is extremely great, that Tradeweb will spend huge amounts of money on acquiring rivals, to increase your market share, what will be the impact on reporting.
I am on imperial. The company is expensive, why is it worth being ready for it, that the stock will shake very much. When I took them before, behind 10 months of holding the shares were quite volatile.
Pennies for the greedy. The company pays 32 cent dividend per share per year, what gives 0,39 % per annum. The company spends $65.6 million on this - about a third of its revenue over the past years. 12 Months. Basically, I don't think, that the abolition of dividends will lead to a rapid fall in stocks, Well, there are no other reasons for lowering the price yet. However, it should still be kept in mind.
What is the end result
Taking shares at the moment 81,62 $. And then there are two options:
- expect, when the stock rises to 98 $. With all the positives, I think, that the indicated level of the share is reached in the next 20 Months;
- hold shares for the next fifteen years. In my opinion, this option is more preferable, because only at a long distance the company will be able to fully realize its own potential.
