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QuestionsCategory: Valuation QuadrantRecent drop in MKTX
Bernice asked 5 months ago

Hi,
May we understand what is the reason for the recent share price drop in MaketAxess?
Thank you!

8 Answers
Victor Chng answered 5 months ago

Hi Bernice,
 
Let take this as a practice exercise. Why don’t you go find out what is the reason for the recent price drop and share it here. I will give my opinion from there. :)

Erastus Jonker answered 5 months ago

I see there has been some insider selling the last year, but no buying. And I guess since COVID-19 the price has climbed too fast. I guess that could have an impact on the price.

Erastus Jonker replied 5 months ago

Maybe I should rather say it has been more volatile since COVID-19

Victor Chng answered 5 months ago

Hi Erastus Jonker,

Good effort and keep it up :)

The price climbing too fast is just part of the reasons. There is still something else. 
 
Do note insider selling is quite common in US but it does not mean that it is a bad sign. 

Lee Ping Pua answered 5 months ago

Has it got to do with the market over reacting to the earlier Fed announcement of its intension of increasing interest rates? Markets are irrationale at times. 

Victor Chng replied 5 months ago

Hi Lee Ping,

Good effort :)

I will say it is just probably a minor effect only.

Lai answered 5 months ago

It was a market wide sell off for tech stocks in late April. So not just Mktx affected. 

Victor Chng replied 5 months ago

Hi Lai,

Good Effort

Your reason and Erastus Jonker's reason are part of the cause that contributed to the fall in share price but there is still one more thing. :)

Lee Ping Pua answered 5 months ago

MKTX’s monthly transaction volume figures for Apr and May are decreasing month to month. Signal of a possible lower revenue for 2Q. 

Victor Chng replied 5 months ago

Hi Lee Ping,

You are right! Good Job :)

That is the final cause which they reported slower growth.

Bernice answered 5 months ago

Hi Victor,
I also guessed it was cos of the insider selling before your explanation.
I looked further, Yahoo Finance states that trading volumes were weak due to a decline in overall credit market activity from the past when credit market activity was elevated, due to the economic disturbance caused by the pandemic. 
Is it correct to say that thus the price drop is temporary?
Thank you!

Victor Chng replied 5 months ago

Hi Bernice,

Good effort :)

I will say it is probably the expectation of investors. When MKTX performed very well during the pandemic, investors expect the trend to continue. The 1Q result did not met investor’s expectation which reflected a slower growth despite the company growing. Hence, with the credit market activity declining (as mentioned by you) together with mismatch expectation – resulting in fall in share price.

Victor Chng answered 5 months ago

Hi Everyone, 
 
I want to say that you guys did a great job by participating in this practice exercise. It is definitely a great start for your investing journey. Continue maintaining this attitude and drive, I will assure you that brighter future is definitely around the corner. :)
 
Once again, keep up the good work and stay safe in this pandemic.