CBOE Outperforms Industry, Trades at a Discount: How to Play the Stock
Shares of Cboe Global Markets, Inc. CBOE have gained 35.1% in the past year, outperforming the industry's growth of 27.9%, the Finance sector's return of 20.7% and the Zacks S&P 500 composite's appreciation of 11.2%. Cboe Global has outperformed its peers, including Intercontinental Exchange Inc. ICE, S&P Global Inc. SPGI and OTC Markets Group Inc. OTCM. Shares of ICE, SPGI and OTCM have gained 32%,16.4% and 2.8%, respectively, in the past year.
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With a market capitalization of $23.69 billion, the average volume of shares traded in the last three months was 0.9 million. CBOE has a solid track record of beating earnings estimates in three of the last four quarters, while missing in one, the average being 1.95%.
Cboe Global shares are trading at a discount to the Zacks Securities and Exchange industry. Its forward price-to-earnings of 23.19X is lower than the industry average of 25.89X.
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Shares of Cboe Global closed at $226.30 on Thursday and are trading above the 50-day and 200-day simple moving averages (SMA) of $221.41 and $210.75, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
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The Zacks Consensus Estimate for Cboe Global's 2025 earnings per share indicates a year-over-year increase of 10.3%. The consensus estimate for revenues is pegged at $2.25 billion, implying a year-over-year improvement of 8.4%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 5.9% and 4.7%, respectively, from the corresponding 2025 estimates. The long-term earnings growth is expected to be 10.5%, better than the industry average of 10.1%. Earnings have grown 11.4% in the past five years, better than the industry average of 9.6%.
One of the 11 analysts covering the stock has raised estimates for 2025, and one analyst has raised the same for 2026 over the past 30 days. Thus, the Zacks Consensus Estimate for 2025 and 2026 earnings has moved up 0.5% and 0.2%, respectively, in the past 30 days.
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Based on short-term price targets offered by 15 analysts, the Zacks average price target is $225.00 per share. The average suggests a potential 0.9% upside from the last closing price.
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Cboe Global's organic strength lies in a diversified business mix that ensures uninterrupted revenue generation and recurring non-transaction revenues. CBOE remains on track to grow its recurring non-transaction revenues. Increases in access and capacity fees and proprietary market data fees are likely to boost Data Vantage's net revenues. Data Vantage is well-positioned to perform well in 2025. CBOE estimates Data Vantage organic net revenue growth to be in the mid to high single-digit range in 2025.The company achieved a greater global breadth of services and products, as well as new distribution channels, apart from generating revenues and cost synergies through strategic buyouts.Banking on operational expertise, the company has been strengthening its balance sheet by improving its cash position and lowering its debt balance. Its leverage ratio, as well as the times interest earned, compares favorably with the industry average.CBOE's strategic investments are well supported by solid capital management. However, higher expenses remain a major concern. Cboe Global has been facing intense competition due to increased market consolidation that tends to reduce market share, and this includes both product and price competition.The company's investment in European, Canadian and Asia Pacific operations remains exposed to volatility in currency exchange rates through translation of net assets or equity to U.S. dollars. The company is also exposed to credit risk from third parties, including customers, counterparties and clearing agents.
Cboe Global's growth strategy of expanding its product line across asset classes, broadening geographic reach, diversifying the business mix with recurring revenues and leveraging technology reflects its operational expertise. Its wealth distribution remains impressive. CBOE increased dividends for 13 straight years and has $644.5 million left under its current share repurchase authorization. Its discounted valuation also raises hope.Thus, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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