Heavy Reliance On Options Volumes Will Eventually Expose Structural Margin And Earnings Fragility

Catalysts

About Miami International Holdings

Miami International Holdings operates technology-focused options, equities, futures and international securities exchanges and clearing businesses.

What are the underlying business or industry changes driving this perspective?

• Heavy reliance on elevated options and futures trading activity, including short dated contracts and complex orders, could expose revenues to a sharp pullback in volume if volatility normalizes or retail engagement cools. This would put pressure on net revenues and earnings.
• Ongoing investment needs in low latency, high throughput technology across multiple platforms, including Sapphire and Onyx, may keep IT and communications expenses structurally high. This could cap adjusted EBITDA margin and limit further margin expansion.
• Rapid expansion into new products and geographies, such as Bloomberg index futures and the TISE and BSX listings businesses, adds regulatory and execution risk that could slow product uptake. This could leave the company with higher operating expenses without a matching contribution to revenue growth.
• Gains in options market share, including complex orders and floor based Sapphire volumes, may attract tougher competitive responses on pricing and rebates. This could pressure revenue per contract and dilute future net revenue growth even if volume remains healthy.
• The use of equity based compensation around the IPO and as an ongoing tool to attract talent can increase recurring share based expense and share count. This may weigh on earnings per share and reduce the operating leverage investors currently see in adjusted earnings.

Assumptions

This narrative explores a more pessimistic perspective on Miami International Holdings compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Miami International Holdings's revenue will decrease by 22.7% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -7.4% today to 30.3% in 3 years time.
• The bearish analysts expect earnings to reach $184.6 million (and earnings per share of $1.67) by about January 2029, up from $-97.1 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 bearish analyst cohort, the company would need to trade at a PE ratio of 26.6x on those 2029 earnings, up from -39.2x today. This future PE is greater than the current PE for the US Capital Markets industry at 25.9x.
• The bearish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.06%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The options market is currently experiencing strong secular growth in multi listed volumes, with third quarter 2025 industry average daily volume at 56 million contracts and October at 67 million contracts. If this level is sustained over time, it could keep MIAX's transaction revenues and earnings more resilient than a bearish view assumes.
• MIAX's options market share in multi listed products reached 17.2% in the third quarter and 19.4% in October. If this higher share is maintained or extended over the long term, it could support higher net revenues and healthier operating leverage than a weaker share price would typically reflect.
• The company has already completed major technology build outs across options, futures and the Sapphire trading floor. If future expense growth slows while revenues remain supported by industry volumes, adjusted EBITDA margins and net margins could stay stronger than expected in a bearish scenario.
• A strong balance sheet following the IPO, with a cash position of US$401 million and senior secured term loan debt repaid, may allow MIAX to keep investing in product and technology without heavy incremental financing costs. This could support earnings stability and reduce downside risk to equity value.
• Long term product and geographic expansion, including Bloomberg 500 and 100 index futures, TISE and BSX listings, and potential new contract types, could diversify revenue beyond current options volumes. This may support revenue and earnings over time even if some individual product lines face pressure.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Miami International Holdings is $39.0, which represents up to two standard deviations below the consensus price target of $48.5. This valuation is based on what can be assumed as the expectations of Miami International Holdings's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $55.0, and the most bearish reporting a price target of just $39.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $608.6 million, earnings will come to $184.6 million, and it would be trading on a PE ratio of 26.6x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of $44.56, the analyst price target of $39.0 is 14.3% lower. Despite analysts expecting the underlying business to improve, they seem to believe the market's expectations are too high.
  
• 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.