MarketAxess stock gets oversold ahead of earnings: buy or sell?

MarketAxess stock has been in a steep decline this year and is now hovering near its lowest level in more than a decade. Shares were trading at $114.24 on Monday, down 81% from their all-time high, wiping out much of the company's value as its market capitalization plunged from more than $21 billion to about $4 billion. 

The key question now is whether its upcoming earnings report can provide the catalyst the stock needs to stage a meaningful rebound.

MarketAxess stock has plunged as growth concerns remain

MarketAxess is a top American financial services company that is used by some of the top firms in the financial services industry globally. It provides an electronic trading platform that connects institutional investors and broker-dealers to trade bonds and other fixed-income securities. It has over 2,000 clients globally.

MarketAxess stock price has been in a strong free fall in the past few months as concerns about its growth have remained. Its most recent results showed that its business continues growing, with demand for fixed-income securities gaining traction. 

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The results showed that its revenue jumped by 12% to $233 million, driven by a 12% jump in commissions and a 10% increase in services. Its business outside of US credit jumped by 20% during the quarter.

Other parts of the business did well, with its net income margin rising to 33.5% from 7.2% in the same period last year.

Still, analysts are concerned about its revenue growth. For example, its upcoming report is expected to show that its revenue dropped by 1.26% in the second quarter to $216 million. 

Analysts expect MarketAxess to report earnings per share of $1.86, down from $2.00 in the same quarter last year. On the positive side, the company has a long history of outperforming analysts' estimates, suggesting its actual results could come in stronger than expected.

Another positive is that it has become a bargain company. For example, the forward price-to-earnings ratio has dropped to 14.3, much lower than the five-year average of 35. Similarly, the forward price-to-sales has moved to 4.52, which is also lower than the five-year average of 12.

Although most Wall Street analysts have lowered their price targets for MarketAxess, their forecasts still imply meaningful upside from current levels. Piper Sandler has a price target of $128, while Morgan Stanley sees the stock reaching $129. UBS is the most bullish with a $200 target, and Barclays expects the shares to climb to $132.

MKTX stock price technical analysis

MarketAxess stock chart | Source: TradingView

The weekly chart shows that the MKTX stock has been in a strong sell-off and is now trading at its lowest level in years. It has already moved below $189, the lower side of the descending triangle pattern. 

The stock has also fallen below $158, its lowest level in November last year. It remains below all moving averages.

On the positive side, the Relative Strength Index (RSI) has moved to the oversold level of 28.20. It is also nearing the oversold zone of the Murrey Math Lines tool. 

Therefore, with pessimism rising, there is a likelihood that the stock will rebound, especially if it releases a better earnings report. If this happens, the stock may rebound and hit the ultimate support level of the Murrey Math Lines tool.

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