CME Group (CME): Target Slashed Again, Business Still Stinks

Deutsche cut CME Group’s (CME) target from $435 to $390 yesterday, and today Bank of America followed suit.

Bank of America analyst Christopher Allen has slashed his target on CME from $475 to $415, but the new forecast still remains a 25% premium to the stock price. Allen’s commentary is far from positive, though:

Fundamental rate pressures likely to continue near-term, as credit issues (manifesting in elevated LIBOR-OIS spreads, hurting Eurodollar vols) and economic uncertainty (impacting Treasury activity) show no signs of abating. This is likely to hold back rate complex (50% of vols/25% of revs) and potentially overall growth at CME.

This is likely to translate into near-term headwinds for CME and we expect Aug. vols (est. 33% YOY decline) to negatively impact stock. And unless the cycle starts to turn or another catalyst appears, we suspect CME could remain under pressure for some time.

But Allen still loves it long term, of course:

Despite near-term caution, still view long-term story as attractive, given diversity, strong mgmt team, and potential catalysts on medium- term horizon (Fed activity, Treasury issuance, NMX), so we continue to rate CME Buy, but we would be waiting for better entry point or a turn in fundamentals to build positions.

BofA maintains BUY on CME Group (CME), target cut from $475 to $415.

See Also:
CME Group (CME): NYMEX Hurts Short-Term, Strengthens Long-Term
CME Group (CME) Buying Nymex (NMX): Shareholders Finally Approve Takeover
CME Group (CME): August Is Looking Awful, Q3 Estimates Could Be Cut

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