What happened
MarketAxess Holdings (MKTX -1.29%) experienced a big decline in April as its stock price plummeted 18.6% for the month, according to S&P Global Market Intelligence. The stock price is still up about 13.5% year to date (YTD), trading at around $317 per share as of May 2.
The major market indexes were up slightly in April as the S&P 500 gained 1.5%, the Dow Jones Industrial Average was up 2.5%, and the Nasdaq Composite was up 0.1%.
So what
MarketAxess Holdings is a leading electronic trading platform for institutional fixed income and credit markets. It had somewhat of an off month in April, as its stock price dropped about 14% on April 5, which accounted for most of the month's loss, after the release of its March monthly-volume statistics.
What was odd was the platform had record trading volume for several of its markets in March as well as for the projected first-quarter numbers.
March saw a record $296.3 billion in total credit-trading volume and $12.9 billion average daily volume (ADV) -- up 4% year over year. That included record high-grade ADV, although market share dipped 60 basis points to 19.9%. High-yield ADV increased 14%, while estimated market share climbed to 18.9% from 15.1%. However, emerging-markets ADV was down 16% year over year, while Trax and FINRA Trade Reporting and Compliance Engine (TRACE) emerging-market ADV was down 32% year over year.
The stock price dipped again after the company reported Q1 earnings on April 26, but it only fell slightly.
The quarter-end numbers were similarly strong, as MarketAxess reported in its Q1 earnings. In the quarter, the firm had record revenue of $203 million, up 11% year over year. Average daily volume hit a record of $13.7 billion, up 14% year over year. Net income increased 14% year over year to $73.6 million. However, high-grade market share dropped 80 basis points to 19.9%, but there were market-share gains across most of the rest of the products traded on its platform.
Now what
The April drop shouldn't be too concerning, considering how strong the bond market has been and the record volume on the trading platform. And the company has increased its market share in most credit products.
The stock got a little too hot, as the price-to-earnings ratio surged to 59 after a hot Q1. It has fallen back a bit to 41 after this April swoon and may still be a bit high. The valuation may still be a bit high, but the outlook for the bond market remains good in the near term, and the stock should continue to outperform. Just keep an eye on that valuation as we move forward.
