Should You Invest in Intercontinental Exchange?

OVERVIEW

Intercontinental Exchange is a company based in the United States which specializes in operating financial markets around the world. The company owns and operates future markets, stock markets, and other markets where securities and derivatives are sold. The company also offers data regarding these financial markets to other companies. The company was founded in 2000.

Why You Should?

  1. The Intercontinental Exchange owns and operates the New York Stock Exchange (NYSE), which is the largest stock market in the world. The market is worth around 25 trillion dollars. The company also operates several other clearinghouses and futures markets. This will offer the company a stable stream of revenue through fees and other products.
  2. Intercontinental Exchange will usually operate better under a strong global economy as it can collect more fees because large institutions trade more often. A strong global economy is returning after this pandemic comes to an end, which is near as there are great vaccine results coming out. This will benefit the company as well as its investors.
  3. Intercontinental Exchange has profit margins of around 26%, which is a great number. Though it is not the best, 26% allows the company to grow faster and offer its investors more return as they have the funds on hand to do so.
  4. The company has seen rising revenues over the past couple of financial years due to the reasons mentioned above. Profits have been a bit more lackluster, but still great. The company looks to continue this growth in the future. These rising metrics will help the company build a stronger balance sheet, which will benefit it in the future. This will also benefit investors. In the financial year of 2019, the company reported revenues of around 5.2 billion dollars and profits of around 1.93 billion dollars. In the financial year of 2018, the company reported lower revenues of around 4.97 billion dollars but higher profits of around 1.99 billion dollars.

Why You Should Not?

  1. The COVID-19 Pandemic has caused trading to grow as people have more time to spend at home. However, the company has seen lower trading volumes from large institutions as well as lower global economic activities. The company has had to keep numbers stable and only looks for these impacts to be short to mid-term.
  2. The progressive Democrat policy from senators like Bernie Sanders and Elizabeth Warren will hurt the company’s results. These policies call for higher taxes on Wall Street, something which could slam the top and bottom line of the Intercontinental Exchange. This will also hurt the investors of the company.

MY OPINION

In my opinion, I think that Intercontinental Exchange is a decent long-term investment due to the ownership of large financial markets, a strong global economy returning, good operating margins, and rising revenues. However, impacts from the COVID-19 Pandemic as well as progressive democratic policy might hurt the company in the future.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.