These 4 factors driving growth of young fintech stock Tradeweb

Key Points

• Tradeweb Markets returned 3.11% in the past month and 14.43% in the last three months.
• Tradeweb stock is in a buy zone as it rallies out of a flat base and a buy point above $97.18.
• Analysts project an 18% earnings growth to $2.25 per share when it reports 2023, with a further 15% rise to $2.58 per share in 2024.

You know those stocks from arcane industries that don’t get all the attention of, say Apple Inc. NASDAQ: AAPL, Microsoft Corp. NASDAQ: MSFT or Nvidia Corp. NASDAQ: NVDA? 

Tradeweb Markets Inc. NASDAQ: TW is one of those. 

The stock is up 3.11% in the past month, and up 14.43% in the past three months. The Tradeweb Markets chart shows the stock is in a buy zone as it rallies out of a flat base with a buy point above $97.18.

Tradeweb has quite a few factors going for it. 

Player in fast-growing industry

First, it serves a growing industry. The company builds and operates electronic marketplaces for various types of financial industry applications. Its network includes many of the largest global asset managers, hedge funds, insurance companies, banks, broker-dealers, dealers, proprietary trading firms and financial advisory firms. 

As assets under management grow worldwide, that bodes well for Tradeweb’s prospects. 

Analysts expect the company’s earnings to grow by 18%, to $2.25 a share, in 2023, which it reports on February 6 ahead of the opening bell. In 2024, earnings are expected to rise by another 15% to $2.58 per share.

For the fourth quarter, Wall Street expects Tradeweb to earn 62 cents per share on revenue of $331.67 million.

Benefits of being a young public company

Second, Tradeweb is a young company, having gone public in April 2019. 

Companies going public in recent years often see big price gains. In general, IPO investors are enthusiastic about the growth opportunities in new stocks. Often, young companies like Tradeweb have disruptive technologies and expansion plans. Early investors willing to take a risk are often rewarded by fast gains. 

For example, Tradeweb has returned 35.80% in the past year and 14.11% in the past three years. The company has a three-year earnings growth rate of 19% and a three-year revenue growth rate of 14%. Revenue has grown for 23 years in a row, a pretty remarkable achievement.

That growth opportunity is not just in the U.S., and is not limited to stocks. Its marketplace facilitates trading of fixed income, equities and money markets. it serves clients in over 65 countries with offices in North America, Europe and Asia. 

In regulatory filings, the company said, “We believe our proprietary technology and culture of collaborative innovation allow us to adapt our offerings to enter new markets, create new platforms and solutions and adjust to regulations quickly and efficiently.”

That’s key, as the financial industry is among the most highly regulated. 

Institutional investors jumping in 

A third factor in Tradeweb’s favor is fast-growing institutional investment. MarketBeat’s Tradeweb institutional ownership data shows that in the past 12 months, 269 institutional buyers accounted for $2 billion in inflows, while 167 institutional sellers totaled $1.01 billion in outflows. 

MarketBeat data shows the largest institutional holder is asset manager Vanguard. It’s pretty significant that financial institutions are buying in, as they have an insider’s view and a deep understanding of Tradeweb’s business model. 

No surprise: AI part of Tradeweb's tech offering

Fourth, and this should come as no surprise to anybody with a pulse: Like most fast-moving technology stocks, Tradeweb is using AI in the trading technologies it’s developing for customers. The company says a key aspect of its proprietary technology infrastructure involves machine learning and AI capabilities. 

It credits that infrastructure with capabilities including nimble product development in collaboration with customers, scalable architecture, disaster continuity and recovery plans, and ongoing security monitoring and alerts. The latter two features are critical regulatory requirements for a financial trading platform. 

Topping EPS & revenue views 

MarketBeat’s Tradeweb Market earnings data show the company beating analyst revenue and earnings views in the past four quarters. 

Naturally, there are some competitors out there. They include MarketAxess Holdings Inc. NASDAQ: MKTX and CME Group Inc. NASDAQ: CME, as well as various banks and broker-dealers. 

Tradeweb stock ended the January 12 session above key moving averages after its rally in the past month.