Buy this exchange stock as postelection volatility boosts trading revenue, Deutsche Bank says

Cboe Global Markets could benefit from the postelection volatility spike, according to Deutsche Bank. Analyst Brian Bedell upgraded the exchange stock to buy from hold and raised his price target to $222 from $211. This updated forecast represents an approximately 13% upside. Bedell said Cboe should maintain healthy revenue growth into at least 2025. This is supported by his belief “that equity markets may remain volatile over the intermediate term post the U.S. election results, at least episodically, driving greater use of index & volatility options & futures products.” Further product innovation and greater adoption of options usage, such as at Robinhood, should also contribute to greater organic revenue growth, Bedell added. “This includes continued synergistic growth in market data and access fees, for which management believes it can grow by 7% this year, and a 7-10% annual range remains mgmt’s expectation over the medium term,” he elaborated. “Building on the successful growth of [zero days to expiration] index options (which now account for nearly half of CBOE’s SPX index options volume), mgmt. has added a variety of expiries & smaller trading increments, indices and ways to trade volatility.” The analyst now thinks Cboe could generate revenue growth of 8% in 2025 and 6% in 2026, up from his prior forecast of 6% and 3%, respectively. Stronger revenue growth should eventually enable positive operating leverage, allowing the company to outperform existing expectations of operating margin stability. The analyst pointed out that while Cboe shares have been the worst performing stock in his coverage in the fourth quarter, the company is also the most directly levered to equity market volatility within his exchange coverage. Bedell added that strategic management decisions could also continue to boost shares. “On expenses, we think mgmt. will be able to moderately slow the pace of expense growth in future years, having mostly built out its global architecture,” he wrote. “Operating leverage will likely still be dependent on macro-driven volume growth, though we think mgmt. may try to calibrate expense growth with organic growth, with upside potential from market volatility — which we think will be the case in at least 2025.” Shares of Cboe are roughly 10% higher on the year. CBOE YTD mountain CBOE YTD chart Analyst sentiment on the stock is tepid. Of the 18 who cover Cboe, 12 have a hold rating, LSEG data shows.