Nasdaq shares jump after Stifel Nicalaus upgrade

AP News
Posted: Jun 09, 2011 12:37 PM
Nasdaq shares jump after Stifel Nicalaus upgrade

Shares of The Nasdaq OMX Group Inc. jumped Thursday morning after an upgrade from Stifel Nicolaus, which believes that most investors have undervalued the company after its failed attempt to acquire NYSE Euronext Inc.

THE SPARK: Analysts with Stifel Nicolaus upgraded Nasdaq to "buy" from "hold" Thursday and set a target price of $28 _ about 20 percent above Wednesday's closing price.

THE BIG PICTURE: In April, Nasdaq and IntercontinentalExchange Inc. sought to acquire the parent company of the New York Stock Exchange in a hostile bid worth $11.3 billion. NYSE rebuffed the bid repeatedly in favor of an earlier, $10 billion offer from the German exchange operator Deutsche Boerse.

Nasdaq withdrew its bid in May after the U.S. Justice Department threatened to block the deal because of antitrust concerns.

THE ANALYSIS: Nasdaq's share price overheated after the bid for NYSE, the Stifel Nicolaus analysts said in a research note. Investors climbed on board due to the 25-percent jump in per-share earnings that analysts expected if the deal went through, they said.

Nasdaq's share price leaped above $29 in April after the bid was announced, after trading below $24.50 during the previous month.

Investors overreacted again after Nasdaq dropped the bid in May, the analysts said. The U.S. Justice Department had threatened to block the deal because of antitrust concerns.

The stock is now trading below its price before the NYSE bid, the analysts noted. Nasdaq shares closed at $23.41 Wednesday.

Nasdaq's "bold" bid suggests that the company is doubling down on its core strength of operating cash equity markets, the analysts said.

"While others in this space are scrambling to diversify away from the cash business, we see an opportunity for (Nasdaq) to expand upon its already dominant U.S. cash equity franchise at a time when others are focused on executing cross-border mergers," the analysts wrote.

SHARE ACTION: Nasdaq shares jumped 69 cents, or 3 percent, to $23.96 in morning trading Thursday. They traded as high as $24.24 earlier in the session.