On Friday, Goldman Sachs adjusted its price target on shares of CBOE Holdings (NYSE:CBOE), increasing it slightly to $187.00 from the previous target of $186.00. The firm has kept its Neutral rating on the stock. The revision follows the second-quarter results, leading to updated earnings per share (EPS) estimates for the years 2024, 2025, and 2026. The new EPS forecasts are set at $8.45, $8.77, and $9.37, respectively, marking an increase from the former estimates of $8.41, $8.70, and $9.28.
The analyst noted the strong performance in CBOE's index options, particularly in SPX and VIX options, which saw year-over-year increases of 19% and 17% in July. This growth is anticipated to continue, backed by the wider adoption of the products and possible cyclical tailwinds due to increased volatility expected in the latter half of the year. The expansion of CBOE's product suite, including international offerings and new product launches, is also predicted to contribute to solid revenue growth.
CBOE's strategic focus on investing in faster-growing segments of its business, coupled with effective expense management, was highlighted as a positive development. The firm aims for a 6%-7% expense growth target for 2024, which is a decline from the more than 10% growth seen in recent years.
The price target increase to $187 is based on a 21X price-to-earnings (P/E) multiple for the fifth to eighth quarters ahead, a ratio that has remained unchanged. This valuation reflects a favorable environment for CBOE's proprietary products and the company's discipline in managing expenses.
In other recent news, CBOE Holdings has seen notable developments in its financial performance and strategic direction. The company has reported a 7% increase in net revenues to a record $502 million, driven by strong performances in its derivatives and Data and Access Solutions businesses. Adjusted diluted earnings per share rose by 13% to $2.15, a testament to the company's robust start to the year.
Moreover, CBOE has announced plans to consolidate its digital asset business, anticipating future cost savings. This strategic move signals a shift in operations, aligning with the company's focus on its core strengths. Oppenheimer, JPMorgan, and Rosenblatt Securities have all revised their price targets for CBOE, reflecting varied expectations about the company's continued growth.
Oppenheimer lowered its price target to $199 from $206 due to slowing growth in SPX options but maintained an Outperform rating. In contrast, JPMorgan raised its target to $166, while Rosenblatt Securities increased its target to $205. These adjustments, alongside the company's reported earnings and revenue results, are part of a series of recent developments, indicating CBOE's momentum in the financial markets.
InvestingPro Insights
As investors consider the implications of Goldman Sachs' updated price target for CBOE Holdings, it's worth noting the company's financial health and market performance through InvestingPro metrics and tips. CBOE has demonstrated a consistent commitment to shareholder value, raising its dividend for nine consecutive years, and maintaining dividend payments for 15 consecutive years. This track record is a testament to the company's financial stability and management's confidence in its business model.
InvestingPro data reveals that CBOE currently trades at a P/E ratio of 24.86, which is relatively low when paired with its near-term earnings growth, suggesting that the stock may be undervalued. Additionally, the PEG ratio stands at an attractive 0.15, indicating that the company's earnings growth could outpace its P/E ratio, a positive sign for potential investors. Despite a revenue decline of 5.78% over the last twelve months as of Q1 2024, analysts have revised their earnings upwards for the upcoming period, indicating an optimistic outlook for the company's profitability.
For a deeper dive into CBOE's financials and to uncover more strategic insights, investors can access additional InvestingPro Tips at https://www.investing.com/pro/CBOE, where 9 more tips are available to guide investment decisions.
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