On Tuesday, JPMorgan adjusted its price target for CBOE Holdings (NYSE: CBOE), the operator of the Chicago Board Options Exchange, to $163 from $165 while maintaining an Underweight rating on the stock. The revision comes as the financial services firm updates its model in anticipation of the first-quarter 2024 earnings.
The analyst from JPMorgan noted that option volumes in the first quarter were approximately 2% below their initial projections. Consequently, the firm has revised its estimates for net transaction revenue to $371 million and total net revenue to $502 million. The first quarter saw a slight sequential decrease in total average daily volume (ADV) for options, which settled at 14.83 million, influenced by a 2% quarter-over-quarter drop in index options volumes.
Despite a year-over-year increase of 1% in total options ADV, the analyst observed a downward trend in overall options market share. Specifically, the Standard & Poor's 500 index options (SPX) average daily volume contracted by 1% in the first quarter to 3.22 million contracts.
However, this figure still represents a significant 17% increase compared to the same period last year. The report also highlighted that open interest (OI) in SPX options, which had been flat in the previous quarter, showed signs of growth acceleration in the first quarter of 2024.
InvestingPro Insights
As JPMorgan recalibrates its stance on CBOE Holdings, it's valuable to consider additional financial metrics and analyst insights. According to real-time data from InvestingPro, CBOE is currently trading at a P/E ratio of 24.82, which is considered low relative to its near-term earnings growth, indicating a potentially attractive valuation for investors. Additionally, the PEG ratio stands at a mere 0.11, further suggesting that the stock may be undervalued based on expected earnings growth rates.
While analysts have revised their earnings expectations downwards for CBOE, it's noteworthy that the company has a robust history of maintaining dividend payments, with dividends raised for 9 consecutive years. This could be a reassuring sign for income-focused investors. Moreover, CBOE has been profitable over the last twelve months, and analysts predict profitability will continue this year. Despite a slight decline in revenue growth, the company has maintained a healthy gross profit margin of 50.83% over the last twelve months.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips to explore, including insights into CBOE's sales projections and price/book multiple. It's worth noting that while some analysts anticipate a sales decline in the current year, the company has experienced high returns over the past decade. With these factors in mind, investors may find value in a deeper dive through InvestingPro's platform. For those interested in a comprehensive analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are over 6 additional InvestingPro Tips available that could provide further clarity on CBOE's financial health and future prospects.
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