BofA lifts CBOE stock price target to $251, maintains Buy rating

On Monday, BofA Securities revised its price target for CBOE Holdings (NYSE:CBOE), increasing it to $251 from the previous target of $245, while upholding a Buy rating on the stock. Currently trading at $206.48, CBOE demonstrates strong financial health with an InvestingPro Overall Score of "GREAT," supported by robust profitability and cash flow metrics. The adjustment comes in the wake of Robinhood (NASDAQ:HOOD)’s full integration of CBOE’s suite of index options, including those for the S&P 500, VIX, and Russell 2000, into its mobile and Legends desktop trading platforms.

BofA Securities analysts highlighted that while the complete rollout of CBOE’s index options on Robinhood is a positive development, they do not anticipate immediate significant volume increases from this integration. They expect that market penetration will require more time than initially projected. In response to the expected gradual uptake, CBOE is planning to continue its increased investment in marketing and investor education throughout 2025 to enhance market penetration.

Following a review of CBOE’s recent performance and management guidance, BofA Securities has updated its earnings per share (EPS) estimates for the years 2025 to 2027. The new EPS forecasts have been adjusted from $9.19/$10.60/$12.25 to $9.24/$10.75/$12.54, factoring in reduced expenses and higher quarter-to-date volumes, although these are partially counterbalanced by a downward adjustment in data revenue projections. The company has demonstrated solid financial performance with an 8.5% revenue growth in the last twelve months, though InvestingPro analysis indicates analysts anticipate a sales decline in the current year.

Management at CBOE has provided guidance for 2025 that suggests a compensation growth rate below 5%, which would mark the slowest increase since 2019 and is less than BofA’s initial 8% growth estimate. Despite these cost savings, some funds are being redirected towards capital expenditures. Moreover, BofA Securities has decreased its long-term growth rate expectation for CBOE’s Data Vantage from 10% to 7%, aligning with management’s updated revenue guidance, which indicates mid-single-digit to high-single-digit percentage growth, compared to the 7-10% range provided in 2024.

In conclusion, BofA Securities’ revised price objective of $251 represents a 20% total return potential for CBOE Holdings shares. The firm reaffirms its Buy rating, citing a strong secular thesis for index options. CBOE has maintained dividend payments for 15 consecutive years, with an impressive 38.5% dividend growth in the last twelve months. According to InvestingPro, the company currently trades near its Fair Value, with 10+ additional exclusive insights available to subscribers through the comprehensive Pro Research Report.

In other recent news, CBOE Holdings experienced a series of significant developments. Citi analyst Chris Allen increased the price target for CBOE shares to $220, maintaining a neutral rating. CBOE’s fourth-quarter earnings showed strong international demand for data, particularly in the Data Vantage segment, leading to an expansion of their local salesforce in Asia. Additionally, the company is in the process of CEO succession planning, with an announcement expected in the coming months.

Simultaneously, Cboe BZX Exchange filed 19b-4 forms with the U.S. Securities and Exchange Commission on behalf of Bitwise, 21Shares, and Canary Capital, a significant step toward the introduction of cryptocurrency exchange-traded products. The filings are aimed at listing and trading spot ETPs that track XRP, the fourth-largest cryptocurrency by market capitalization.

Meanwhile, Cboe Global Markets announced the appointment of Meaghan Dugan as Head of U.S. Options, part of a broader effort to expand the company’s Global Derivatives division. Dugan brings over two decades of experience to her new role at Cboe, where she will be responsible for the strategic direction and growth of the U.S. options business.

In contrast, JPMorgan analysts downgraded shares of CBOE Holdings from ’Neutral’ to ’Underweight’ and reduced the price target for CBOE stock to $174. The downgrade follows observations of a plateau in the growth of CBOE’s SPX franchise and anticipations of a deceleration in the VIX franchise. William Blair also initiated coverage on CBOE Holdings with a Market Perform rating, highlighting the company’s position as a leading derivatives and securities exchange network.

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