Digitization And Synergies Will Expand pan-European Markets

Key Takeaways

• Broadening high-margin digital services and integrated European platforms positions Euronext for accelerated, sustainable top-line and margin growth surpassing current expectations.
  
• Strategic acquisitions, regulatory tailwinds, and ongoing exchange integration enhance diversification, solidify competitive advantage, and drive lasting gains in core profitability and market share.
  
• Structural shifts towards private markets, regulatory complexities, integration risks, and disruptive competition threaten Euronext's growth, profitability, and ability to maintain its market leadership.

Catalysts

Operates securities and derivatives exchanges in the Netherlands, France, Italy, Belgium, Portugal, Ireland, the United States, Norway, Denmark, and internationally.

• Analyst consensus expects ATHEX integration to add €12 million in annual synergies, but given Euronext's history of revising synergy targets upwards post-integration (e.g. Borsa Italiana), ATHEX could deliver even higher cost and revenue synergies by fully leveraging the single technology platform and pan-European liquidity pool, materially boosting EBITDA and net income sooner than forecast.
  
• Analysts broadly highlight the strategic value from business diversification and recent acquisitions, but with the rapid ramp in Euronext's value-added services-now showing double-digit organic growth-there is room for outsized, compounding revenue growth and significant margin expansion as these scalable, digital offerings further penetrate the large addressable European market.
  
• Euronext's accelerating expansion into high-margin post-trade and data analytics services, combined with increasing demand for proprietary and differentiated datasets by both retail and institutional clients, positions the group for robust, sustainable top-line growth and a structural uplift to EBITDA margins over the next several years.
  
• The accelerating digitization of financial assets and trading across Europe, coupled with the integration of more exchanges like ATHEX, will drive a step-change in volumes and create new fee streams, supporting compounding revenue growth well beyond current expectations as more issuers and investors migrate to Euronext's platform.
  
• Euronext's role as consolidator, benefiting from regulatory harmonization and pan-European savings/investment initiatives, uniquely positions it to capture outsized wallet share as global capital flows and sustainable investment mandates rise, driving higher listings, trading, and ancillary revenues while cementing long-term earnings power.

Euronext Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Euronext compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Euronext's revenue will grow by 8.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 37.6% today to 39.8% in 3 years time.
• The bullish analysts expect earnings to reach €886.3 million (and earnings per share of €8.98) by about August 2028, up from €652.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 22.5x on those 2028 earnings, up from 21.7x today. This future PE is greater than the current PE for the GB Capital Markets industry at 19.9x.
• Analysts expect the number of shares outstanding to decline by 2.03% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.9%, as per the Simply Wall St company report.

Euronext Future Earnings Per Share Growth

Risks

• The ongoing shift of capital raising towards private markets, coupled with subdued growth in public listings and IPO revenue, could limit Euronext's ability to sustainably grow both revenues and earnings, especially as the company emphasizes its leading listing franchise and ambitions to develop Athens as a regional hub.
  
• Intensifying regulatory requirements around market structure, ESG, and transaction transparency are likely to increase Euronext's operational costs and complexity over the long term, pressuring net margins and potentially eroding its competitive advantage.
  
• Euronext's continued reliance on volume-driven trading revenues-evident in its exposure to equity, fixed income, and derivatives trading-makes it vulnerable to cyclical declines and heightened competition from alternative trading venues, which could destabilize recurring revenue and pressure earnings during market downturns.
  
• Ongoing integration risks from recent and future acquisitions such as ATHEX, Admincontrol, and Borsa Italiana may lead to higher than anticipated restructuring costs, operational inefficiencies, and delays in realizing synergies, threatening both net margins and overall return on investment.
  
• The emergence of decentralized trading platforms, fintech entrants, and price pressures in data services all pose structural threats to Euronext's market share, risking long-term revenue erosion and profitability as technology-driven competitors change the capital markets landscape.

Valuation

• The assumed bullish price target for Euronext is €174.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Euronext's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €174.0, and the most bearish reporting a price target of just €114.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €2.2 billion, earnings will come to €886.3 million, and it would be trading on a PE ratio of 22.5x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of €141.7, the bullish analyst price target of €174.0 is 18.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.