Tradeweb (TW) and MarketAxess (MKTX) stocks have done well in the past few months, helped by the rising demand for fixed income solutions. MKTX has soared to $280, up by over 45% from its lowest point this year, bringing its market cap to over $10 billion.
Tradeweb has done much better, with its stock soaring by over 46% this year and 60% in the last 12 months. Its performance has pushed its valuation to over $31 billion, making it one of the biggest companies in the industry.
Giant players in fixed income
Stock brokerage companies like Robinhood and Schwab are well-known brands in the United States. That is because most people interact with stocks all the time.
While the equity market is big, the debt market is much bigger. Data by the International Monetary Fund (IMF) shows that the global debt market is worth over $315 trillion while the equity market is valued at over $111 trillion. The main issue is that debt is not seen as sexy as equities.
Tradeweb and MarketAxess are some mostly unknown companies among most Americans because of their role in the fixed income industry. They are, nonetheless, well-known brands among institutional investors.
Established in 2000, MarketAxess has grown to become one of the top players in the debt market, handling trades worth over $3.1 trillion in 2023. It has also grown itss market share in the high-grade and high-yield bond market to 20%.
Tradeweb is the biggest player in the debt market with clients from over 70 countries. Its platform that lets investors buy and sell fixed income. Its main difference with MarketAxess is that it relies on request-forquote (RFQ) and order book trading. In this, when a customer places an order, the company’s technology les them seek competitive pricing.
MarketAxess, on the other hand, focuses on open trading, which enables anonymous all-to-all trading.
The other difference between the two is that Tradeweb provides more solutions like government bonds, mortgage-backed securities (MBS), interest rate swaps, and corporate bonds. As a result, the company handled deals worth over $8.8 trillion in 2023.
Tradeweb and MarketAxess make money by taking a small cut of all orders that pass in their platform.
Growth is accelerating
Tradeweb and MarketAxess have done well in the past few months because of the anticipated demand for credit in the US and other countries.
This demand has led to a substantial increase in trading volumes. The most recent financial results shows that Tradeweb had an average daily volume (ADV) of $1.9 trillion, a 48% increase from the same period in 2023. This growth happened mostly because of the surge in US government bonds.
Its revenue rose by 30% to $404 million, with rates, credit, and market data being the best performers with annual changes of over 30%. Its net income jumped by 33.8% to over $136 million.
Analysts are optimistic that Tradeweb’s business will continue doing well as interest rates start moving downwards. Tradeweb is a highly profitable company with a gross profit margin of 94% and a net margin of 28%.
MarketAxess has also continued doing well. In a recent statement, the company said that its daily trading volume averaged $45.2 billion in September, a 52.5% increase from the same period in 2023.
Its earnings report showed that total revenue rose by 10% in the second quarter to over $197.7 million. Its operating income rose by 7% to $81 million while its net income spiked by 8% to $65 million.
Like Tradeweb, MarketAxess is a bigh-margin company. It makes gross margins of 65% and net income margin of over 33%.
Marketaxess stock analysis
MKTX chart by TradingView
The daily chart shows that the MarketAxess share price bottomed at $197.72, its lowest point in October and July. It has recently formed a golden cross pattern as the 200-day and 50-day Exponential Moving Averages (EMA).
The stock is nearing the important resistance point at $294.75, its highest swing in December last year. Also, the Relative Strength Index (RSI) and the MACD have continued rising. Therefore, the path of the least resistance is bullish, with the next point to watch being at $294, which is about 7% from the current level.
Tradeweb stock forecast
TW chart by TradingView
On the daily chart, we see that the TW share price has done well in the past few months. It has remained about 12% above the 50-day moving average and 25% higher than the 200 MA.
The Relative Strength Index (RSI) and other indicators have continued rising, with the RSI moving to the extremely overbought point at 80. Therefore, while Tradeweb is seeing more growth, there is a risk of a pullback now that it has soared sharply recently.
Therefore, in this case, some analysts believe that the stock may see a pullback in the near term as some traders start taking profits.
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