On Monday, Barclays (LON:BARC) has downgraded CBOE Holdings (NYSE:CBOE), moving the stock from an Overweight to an Equal Weight rating, accompanied by a reduction in the price target from $230.00 to $220.00. The downgrade reflects the firm's perspective on the company's future financial performance in comparison to its recent growth trajectory and market valuation.
According to InvestingPro data, nine analysts have recently revised their earnings expectations downward for the upcoming period, supporting this cautious stance.
CBOE Holdings, known for its index options franchise, particularly the SPX contract, has experienced significant growth in recent years. This success has been bolstered by a strategic review that has resulted in a more focused and cost-aware business approach.
Despite these positive developments, Barclays foresees challenges ahead. InvestingPro analysis reveals that analysts anticipate a sales decline in the current year, with revenue growth forecast at -0.45%.
Barclays anticipates that CBOE will face increasingly difficult comparative measures going into 2025, especially concerning the SPX contract. The firm also notes limited potential from the adoption of options on the HOOD (NASDAQ:HOOD) index. Furthermore, the projection includes minimal upside for CBOE's profit margins.
The valuation of CBOE Holdings is another factor contributing to the downgrade. According to Barclays, the forward-year two price-to-earnings (FY2 P/E) ratio remains around the highest it has been in recent years.
Additionally, CBOE's stock is currently trading at a premium compared to the S&P, which suggests that the stock's price adequately reflects its value, leaving little room for growth.
Barclays' assessment indicates a cautious outlook for CBOE Holdings, aligning the stock's rating with its anticipated performance and market position in the near future.
In other recent news, Cboe Global Markets (NYSE:CBOE) has reported robust third-quarter results with net revenue reaching a record $532 million, marking an 11% increase year-over-year. The company's adjusted earnings per share rose by 8% to $2.22, driven primarily by a 13% organic net revenue growth in the Derivatives market and a 12% rise in Cash and Spot Markets revenues.
Cboe is set to introduce the first cash-settled index options based on the price of spot Bitcoin, marking a significant development in the company's expansion into Bitcoin-related options. In addition, Deutsche Bank (ETR:DBKGn) has upgraded CBOE's stock rating from Hold to Buy, anticipating sustained revenue growth through 2025 due to market volatility and product innovation.
Conversely, Morgan Stanley (NYSE:MS) has downgraded CBOE's stock from Equal-weight to Underweight, citing concerns over potential slowing growth and margin pressure. The company has also completed the Canadian migration to the Cboe technology platform, allowing for resource redeployment to growth areas. These are the recent developments for CBOE Global Markets.
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