Euronext: Solid Results And Strategic Progress, Buy Confirmed

Euronext maintains a 'Buy' rating following robust Q2 results, with top-line sales of €466 million and EPS of €2.02 both exceeding consensus, driven by strong non-volume related revenue growth. The positive outlook is underpinned by strategic initiatives, including the ATHEX acquisition, anticipated to be EPS accretive from 2026 with €12 million in synergies, and plans to broaden collateral eligibility and internalize settlement for key markets, enhancing its post-trade segment and control over the equity trading value chain. Despite increased M&A-related expenses, Euronext is considered undervalued at an 18.3x 2025 P/E multiple relative to peers, with a target price of €148 implying significant upside and a double-digit total return.

Analysis

Euronext's Q2 results demonstrated fundamental strength, reinforcing a positive outlook. The company surpassed consensus estimates with €466 million in top-line sales (+2%) and an EPS of €2.02 (+5%), driven by broad-based performance across its segments. Critically, the growth in non-volume related revenues, which now constitute 58% of the total, signals a strategic shift towards a more stable and predictable revenue model, mitigating exposure to market volatility. While operating expenses rose 8% year-over-year to €168 million, this increase is directly linked to M&A activities, and the company has reiterated its cost guidance. The balance sheet remains solid, with net debt to adjusted EBITDA at 1.8x, which is comfortably within the firm's target range of 1-2x.

Forward-looking catalysts provide a compelling case for future value creation. The planned acquisition of ATHEX is expected to gain regulatory clearance by Q4 and become EPS accretive from 2026, delivering an estimated €12 million in recurring synergies. Furthermore, the initiative to internalize settlement for its core Paris, Amsterdam, and Brussels markets by 2026 is a significant strategic move. This will grant Euronext full control over the equity trading value chain and potentially add an incremental 2-3% to EPS, an upside not yet factored into current forecasts. From a valuation perspective, Euronext appears inexpensive at an 18.3x 2025 P/E multiple, representing a notable discount to peers such as London Stock Exchange Group and Deutsche Börse. The analyst's price target of €148 per share, based on a 20x P/E, suggests a potential double-digit total return over the next 12 months, even before accounting for the full impact of its strategic initiatives.

Key Decisions for Investors

• Given the strong fundamentals, strategic growth pipeline from M&A and vertical integration, and a valuation discount to peers, investors should consider the stock's potential for a double-digit total return, supporting a bullish stance.
• Monitor key execution milestones, particularly the regulatory approval of the ATHEX acquisition in Q4 and management's updates on the CSD expansion strategy, as these represent significant un-priced catalysts for future EPS growth.
• While the outlook is positive, investors should remain cognizant of downside risks, including the normalization of trading volumes, potential regulatory headwinds, and the successful integration of acquisitions to achieve projected synergies.
• The growing share of stable, non-volume related revenue (58% in Q2) strengthens the investment case and could justify a re-rating closer to peer valuations over time as the market prices in this enhanced business resilience.