Please ensure Javascript is enabled for purposes of website accessibility

Nasdaq Stock (Wrongly) Fell 12% in February on Coronavirus Fears

By Jon Quast - Mar 4, 2020 at 2:53PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Stock exchanges are among the only businesses that thrive on market volatility.

What happened

Shares of Nasdaq (NDAQ 2.00%), owner of multiple stock exchanges, were down 11.9% in February, according to data provided by S&P Global Market Intelligence. This stock sell-off corresponds perfectly to the overall market correction, in which fears related to the global COVID-19 crisis fueled panic among investors.

The novel coronavirus will indeed have ripple effects throughout the world's economy. Tourism-related businesses are seeing declining demand. And manufacturing disruptions in places like China and South Korea will likely cause short-term supply constraints in consumer goods and semiconductor components. But not all industries are equally affected, and I believe Nasdaq's business will be particularly resilient for the rest of 2020 and beyond.

A wooden game piece painted red stands out from a line of unpainted wooden ones

Image source: Getty Images.

So what

Nasdaq generates revenue in a few different ways. Among other things, it charges fees to companies that choose to list on Nasdaq's stock exchange, and racks up fees when trades are placed. All told, it generated $2.54 billion in revenue in 2019, but that was only good for 3% organic growth. It turned out that overall stock-market trading volume was down in 2019 compared to 2018, and Nasdaq's trading revenue fell accordingly.

But trading volume is revving up significantly in 2020. For example, trading volume recently increased so much that the Robinhood app crashed, leaving many would-be traders with no option but to wait for the platform to come back online.

As heightened market volatility continues in 2020, Nasdaq only stands to benefit. That makes it one of the most resilient businesses to own during this time of economic uncertainty.

Now what

To start out March, Nasdaq's stock has almost completely recovered to where it traded prior to the fall. I think this story is a great reminder of why investors need a watch list of great companies to consider buying.

I don't believe you need to time the market when investing in top stocks. But occasionally great stocks sell off on irrational fears, providing opportunistic entry points to companies you're comfortable holding at least three to five years.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nasdaq, Inc. Stock Quote
Nasdaq, Inc.
NDAQ
$155.59 (2.00%) $3.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.