50% Off! Beat the market in 2025 with InvestingProCLAIM SALE

CME stock undervalued? Citi says competitive concerns are overblown

EditorEmilio Ghigini
Published 09/12/2024, 05:27 AM
CME
-


On Thursday, Citi reiterated its Buy rating on CME Group (NASDAQ:CME) stock with a steady price target of $240.00. The firm highlighted a favorable outlook for CME Group, contrasting it with CBOE Holdings. Citi has recommended an overweight position in CME Group and an underweight position in CBOE, based on their analysis of the current market conditions and future expectations.


The firm's preference for CME Group stems from its positive leverage to interest rates and equities, along with a compelling commodities narrative. In contrast, CBOE's performance is more dependent on its index franchise. Current volume trends for both companies are surpassing estimates, but CME Group is believed to hold more potential for upward revisions to consensus forecasts.


Citi also pointed out the possibility of a strategic shift in CME Group's (NASDAQ:CME) approach to capital returns in the fourth quarter of 2024. While CBOE has already increased its dividend and buyback program, CME Group may be poised for a similar move, which could positively influence its valuation.


Moreover, CME Group is currently trading at a multiple that is two times lower than CBOE's, based on Citi's 2025 earnings per share (EPS) projections. This is a significant change from the average premium of four times that CME Group has commanded over CBOE in the past five years. Citi believes that the current discount on CME Group's shares is due to overstated competitive concerns and sees this as an unwarranted valuation gap.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.