Cboe Global Markets is likely to continue gaining ground following the renewal of its S & P Dow Jones Indices (DJI) contract, according to Morgan Stanley. The investment bank double upgraded Cboe to overweight from underweight. It also hiked its price target on shares to $358 from $258, implying nearly 22% upside from Thursday’s close. In late September, Cboe extended its agreement that gives its exclusive rights to list and offer trading of options on the S & P 500 Index, some of the most widely traded instruments in the world. “The S & P DJI extension through 2051 addresses a key underpinning of our prior UW, while options growth has proved more durable than we expected and we see attractive optionality with new prediction markets product launch,” analyst Michael Cyprys said Friday in a note to clients. “This is in the context of negative investor sentiment and positioning yet attractive valuation.” CBOE YTD mountain CBOE year to date Morgan Stanley raised its earnings per share estimates for Cboe for each of the next two years to 16% and 18%, respectively, pointing to CBOE’s “stronger volumes, improved capture, and lower expenses.” However, those estimates don’t account for the firm’s prediction markets tied to individual company key performance indicators, which should drive additional value, per Cyprys. “Company-specific KPI prediction markets provide attractive upside optionality not reflected in our estimates or consensus, against a backdrop of cautious expectations and negative investor sentiment,” the analyst wrote. Morgan Stanley’s call goes against consensus on Wall Street. Of the 19 analysts covering Cboe Global Markets, just 7 have a buy on the stock, while 11 have a hold rating on it, LSEG data shows. Shares have risen 17% year to date.
