MarketAxess (MKTX) will likely benefit from abating competition and a reacceleration in electronic bond trading fueled by artificial intelligence and electronic market makers, BofA Securities said in a note Friday.
"As more AI-enabled tools are launched for bond trading, the value proposition of e-trading will become increasingly superior to the phone," the investment firm said.
BofA analysts said MarketAxess was the first mover in bond electronic trading, but its market share has fallen to 33% from 57% in five years with the entry of rivals like Tradeweb (TW) and Trumid with a superior innovation engine, the note said. Tradeweb and Trumid, however, "have already picked the low-hanging fruit" and MarketAxess' share losses are now expected to decelerate, analysts said.
As MarketAxess valuation is sliding to an all-time low at the same time that competitive headwinds are subsiding, there is an opportunity to be more constructive on the company's shares, the investment firm said.
MarketAxess may also benefit from an increase in hyperscaler debt issuance, which has jumped 8 times year to date, and already accounts for 10% of total US investment grade corporate bond issuance, the note said.
BofA upgraded MarketAxess to neutral from underperform, with a $170 price target.
Shares of MarketAxess were up more than 3% in Friday trading.
Price: 120.02, Change: +3.69, Percent Change: +3.17
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