Tradeweb Markets Inc. is a financial assets electronic marketplaces operator, headquartered in New York. The company was founded in 1996, but only went public in the spring of 2019. With a market cap of $13B and annual revenue north of $1.2B, Tradeweb certainly has its place in the financial services industry. Its valuation, however, has actually been cut almost in half since the beginning of 2022.
The stock currently trades below $56 a share, which is a far cry from its $102.33 record reached in the last days of 2021. Given the company’s healthy growth rate, profitability and debt-free balance sheet, the problem is obviously not in its fundamentals. In our opinion, the stock has been falling merely because it was overvalued. Whether it is undervalued now is another matter, but Elliott Wave analysis suggests a bottom might be near.
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Tradeweb ‘s daily chart reveals that the 2022 decline is shaped as a textbook five-wave impulse. The pattern is labeled 1-through-5 in what should be wave A of a bigger A-B-C correction. Notice how the 61.8% and 38.2% Fibonacci resistance levels relative to waves 1 and 3 marked the end of waves 2 and 4, respectively.
According to the theory, a three-wave correction follows every impulse. In Tradeweb ‘s case, this means we should expect a notable recovery in wave B towards the termination area of wave 4 of A. If this count is correct, shares can rise by over $20 from here. A bullish MACD divergence between waves 3 and 5 supports the mid-term positive outlook.
Once the price has approached the $75 – $80 area, however, it would be time for the bears to return in wave C. Downside targets below $50 would make sense once they do. If Tradeweb ‘s business is still as solid then as it is now, the stock would be a real bargain at some point in 2023.
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