From my (first) post on ragingbull:
The OTC numbers I posted, though they show a decline in absolute volume, should not be troubling. Both short term and long term factors suggest NITE will prosper.
The key (short term) reason for not worrying is that NITE should hit (or exceed) analysts' estimates. The key (long term) reason for enthusiasm is that NITE has abundant new revenue sources to blow away the numbers going forward.
Short Term:
Management has guided analysts down to what is now a First Call average of 37 cents for the quarter. This is only 3 cents above the 1Q results of 34 cents, when NITE handled some 27% less OTC share volume than it will handle in this quarter. In sum, while the summer has been seasonally slow, there should still be plenty of growth over NITE's first quarter business to justify the emerging First Call consensus.
By the way, you should check out NITE's web page, knight-sec.com on a daily basis, for they tend to have the very latest First Call estimates on the site (you couldn't get a more current number without subscribing to First Call itself). If nothing else, NITE's careful attention to these numbers on its own web page exhibits, at least to me, how focused management is upon framing and, ultimately, confirming these numbers.
Long Term:
There are almost too many new revenue streams to count, making NITE's long term prospects almost enviable:
- ISE (options)
- European institutional fills of U.S. equities
- European fills of European equities
- Institutional order flow
- OLB growth (if any)
I believe the company is extremely excited about the application of its business model to the European markets in particular. Wholly apart from Euro institutional fills of U.S. equities (which itself has lots of room for growth, from a baseline of zero), I'm told that OLB growth is booming in Germany (and to a lesser extent in the U.K.), yet the market making activities in those market are quite fractured, effectively reducing barriers to entry, and in fact permitting a focused market participant to grab and consolidate market share. NITE is very much targeting these markets.
As if international possibilities (institutional and OLB) were not enough, there is an entire domestic options market that is just now being targeted through NITE's involvement in the ISE.
And, as if international and options possibilities were not enough, I'm given to understand that domestic institutions represent just about 20 percent of NITE's revenues, but that this is perhaps one of the fastest growing segments of NITE's business.
In sum, we'll get by the third quarter. And when we do, when we get into 2000 and beyond, watch out.
Gary Korn |
