Options And Futures Expansion Will Reshape This Exchange Operator’s Long Term Potential

Catalysts

About Miami International Holdings

Miami International Holdings operates MIAX branded exchanges in options, equities, futures and international listings, built around proprietary exchange and clearing technology.

What are the underlying business or industry changes driving this perspective?

• The surge in multi listed options activity, including strong demand for short dated expirations and complex orders, positions MIAX to capture a larger share of transaction fees, which can support net revenue growth and operating leverage over time.
• Completed build out of purpose built, high throughput, low latency trading platforms across options, futures and international exchanges gives MIAX a fixed cost base that can support higher volumes with limited incremental expense, which can support adjusted EBITDA margins and earnings.
• Expansion into futures with the MIAX Futures Onyx platform and planned Bloomberg 500 and Bloomberg 100 index futures listed at OCC creates new product lines that can attract equity derivative flows, which can support transaction revenue and clearing related economics.
• The MIAX Sapphire trading floor in Miami, combined with Miami’s rise as a global financial center, can attract additional market maker and broker activity, which can support options market share, revenue per contract and potentially mix toward higher margin floor and complex trades.
• International growth through licenses such as TISE and BSX widens MIAX’s reach to global debt issuers and cross border investors, which can support listing fee revenue, diversification of net revenues and more stable cash generation.
• Growing participation from retail investors in options and the extension of that activity into futures align directly with MIAX’s technology first model and risk protections, which can support sustained volume growth, higher transaction fees and improved scale on fixed operating expenses.

Assumptions

This narrative explores a more optimistic perspective on Miami International Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Miami International Holdings's revenue will decrease by 22.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -7.4% today to 31.1% in 3 years time.
• The bullish analysts expect earnings to reach $188.0 million (and earnings per share of $1.7) by about February 2029, up from $-97.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 36.6x on those 2029 earnings, up from -37.2x today. This future PE is greater than the current PE for the US Capital Markets industry at 23.1x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.81%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Options volumes and market share are heavily linked to periods of elevated volatility and strong retail trading activity. If volatility or retail engagement normalizes over time, industry contract volumes and MIAX’s share of that activity could level off or decline, which would pressure net revenue and make it harder to sustain the current adjusted EBITDA margin of 44% and adjusted earnings of US$40 million.
• The futures business is still working through platform migrations and was affected by lower commodity market volatility. If futures participants are slow to fully adopt the new MIAX Futures Onyx platform, or if volatility in key contracts like Hard Red Spring Wheat remains subdued, futures net revenue of US$4.8 million could stay under pressure and weigh on consolidated earnings.
• MIAX has invested heavily in technology platforms, the Sapphire trading floor, and international acquisitions such as TISE. If volumes, market data demand, or listing activity do not scale as expected over a multi year period, the higher adjusted operating expenses of US$61.6 million could limit further margin expansion and constrain future net margin improvements.
• The business model depends on fee structures, regulatory approvals for new products such as additional short dated options and index futures, and participation in pay plans and clearing arrangements. Any long term changes in regulation, fee sharing, or approval timelines could affect transaction fees, access fees, and market data income, which would directly impact net revenue and earnings growth.
• International expansion into markets such as Europe and the U.K. through TISE, and continued growth in listings and cross border activity, rely on sustained issuer and investor interest. If global debt issuance or demand for those venues weakens over time, the International segment net revenue of US$5.5 million could stagnate, limiting diversification benefits and leaving overall profitability more exposed to U.S. options cycles.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Miami International Holdings is $55.0, which represents up to two standard deviations above the consensus price target of $48.5. This valuation is based on what can be assumed as the expectations of Miami International Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $55.0, and the most bearish reporting a price target of just $39.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $603.8 million, earnings will come to $188.0 million, and it would be trading on a PE ratio of 36.6x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of $42.23, the analyst price target of $55.0 is 23.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.