NYSE Euronext: Is a Sell Rating Justified?

Echo To All submits: As per a recent Fool article, Goldman Sachs gave NYSE Euronext (NYX) a sell and gave a buy to Nasdaq Stock Market (NDAQ) thinking the ‘Regulation NMS’ will hurt NYX’s market share.

Is this something we already did not know? NYX has been losing market share for some time now to the Naz and BATS exchange; why will this make it any different? Market forces drive competition, and NYX is already feeling a loss in market share because other exchanges are already beating it. I mean trades are being made via the other exchanges for a reason. NYX can fix this market share leak if they decide to do something about it.

Also, a quick review of valuation (as per Yahoo Finance) speaks for itself:

NDAQ has a PEG of 1.75

NYX has a PEG of 1.46

Keeping in mind NYX is already growing quite nicely in the US market despite the continued leak in market share. But they also merged with an exchange that is increasing its market share in Europe, and growing like gangbusters in all areas of the exchange.

Do not get me wrong, NYX must compete with the other exchanges to stop the rate to which it is losing market share in the US. (Most likely making their trading platform even less Hybrid, and more computer.) I just do not see the logic in selling a cheaper stock whose company has global prospects, for a more expensive stock whose company has limited prospects.

During the earnings report NYX stated they are now fully compliant with Regulation NMS. So the 2nd quarter results should prove GS right or wrong.

Disclosure: Author has a long position in NYX

NYX 1-yr chart

Comments

[minibars:]

Why is this article unsigned? Nice to know the author is "long NYX," but too bad he has to remain anonymous.

2007 Apr 27 09:18 AM

[Echo To All:]

usually the 'echotoall submits' links to my blog (echotoall.com) so you can get a better idea of what i'm about.

(i made a deal w/myself concerning my anonymity... if DNDN goes to 50 or NYX doubles by year end, i'll post my life story on my blog and no longer be anonymous... w/pictures of me celebrating and all :)

2007 Apr 27 10:29 PM