Please ensure Javascript is enabled for purposes of website accessibility

Why Tradeweb Markets Surged 26.5% in May

By Billy Duberstein – Jun 6, 2020 at 3:00PM

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

The electronic trading platform saw a huge spike in activity during the eventful first quarter.

What happened

Shares of Tradeweb Market (TW -2.18%) rose 26.5% in May, according to data from S&P Global Market Intelligence. The electronic trading platform reported earnings during the month, highlighting a quarter which saw an enormous spike in trading activity on its platform, leading to better-than-expected results.

So what

During the quarter, Tradeweb saw a 25.6% increase in gross revenue on a 39% increase in average daily volumes executed through its platform. Transaction revenues, which make up a majority of overall revenue, increased about 37.2%. The overall revenue growth marked an acceleration over just 13% revenue growth in all of 2019.

Man in suit seen from neck-down holds up a virtual screen in front of him with a financial graph on it and a picture of a globe.

Image source: Getty Images.

Tradeweb's margins also expanded, showing the operating leverage in the business, with adjusted EBITDA margins growing from 37.5% to 46.4%, and adjusted (non-GAAP) EPS surging 60.9%, from $0.23 to $0.37. Both revenue and adjusted profits came in well ahead of analyst expectations.

CEO Lee Olesky said:

We see the long-term trend toward more electronic markets accelerating, which is reflected in both client behavior and record trading volumes. Our clients are interacting with Tradeweb in new ways, expanding their use of tools like portfolio trading and net-spotting, and demonstrating greater confidence in electronic trading and digital workflows. For many, and we hear this all the time, there's simply no going back to the old way of doing things. 

Now what

Investors shouldn't expect the acceleration of trading activity to continue, since the first quarter set volatility records, with the quickest-ever 30% decline in the stock market and unprecedented dislocations in more illiquid markets where Tradeweb excels.

Nevertheless, the COVID-19 crash could mark a favorable turning point for Tradeweb. More and more of the old-school, manual, and relationship-based trading in Treasuries, municipal bonds, corporate debt, derivatives, and other illiquid instruments have been gravitating toward electronic trading solutions like TradeWeb's over the years. The COVID-19 crisis should give those existing trends a jump-start, giving Tradeweb a nice tailwind over the long-term as next-generation trading solutions take over from older ways of doing things.

Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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

Tradeweb Markets Inc. Stock Quote
Tradeweb Markets Inc.
$56.42 (-2.18%) $-1.26

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

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.