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Sector Snap: Prudential Rates Exchanges
Wednesday August 23, 12:23 pm ET
Prudential Analyst Initiates Coverage of Six Exchanges; Nasdaq, ICE Get Top Billing
NEW YORK (AP) -- A Prudential analyst initiated coverage of six exchanges Wednesday, rating them based on merger activity and how much the companies stand to benefit from the industry's shift toward electronic-derivatives trading.
Prudential analyst Robert C. Rutschow initiated coverage on NYSE Group Inc. with a "Neutral" rating and a $60 price target. The company faces integration risks from its merger with Euronext, and is losing market share to Nasdaq, Ruschow said. He also is concerned NYSE appears willing to pursue acquisitions to achieve sheer size at the expense of enhanced strategy.
NYSE Group shares fell 86 cents to $56.75 on the New York Stock Exchange.
By contrast, Rutschow started Nasdaq Stock Exchange Inc. with an "Overweight" rating and a $40 price target. Nasdaq is better at pleasing market participants, Rutschow said, and he expects Nasdaq to return to volume growth in the mid-teens. Shares of Nasdaq rose 7 cents to $28.33 in midday trading.
Rutschow also initiated IntercontinentalExchange Inc. at "Overweight" with a $75 price target, saying ICE stands to benefit from the general shift toward electronic exchanges, and trades at a discount. Shares of ICE rose 68 cents to $63.10 on the NYSE.
Rutschow initiated CBOT Holdings Inc. with a "Neutral" rating and a $125 price target. He said CBOT has been slow to adopt electronic trading for contracts other than interest-rate futures. Ruschow also thinks CBOT may bid for the New York Board of Trade, which adds acquisition risks.
Shares of CBOT Holdings fell 12 cents to $116.49 on the Big Board.
As Rutschow's least favorite among the six, Chicago Mercantile Exchange garnered an "Underweight" rating and a $425 price target. He said investors are overestimating the benefits of the company's deal with the New York Mercantile Exchange, and also noted that CME may lose volume on interest-rate contracts if interest-rate volatility slows.
Shares of CME fell $4.49 to $446.91 on the NYSE.
Rutschow initiated coverage of International Securities Exchange with a "Neutral" rating and a $45 price target. The ISE is growing on higher options volume, Rutschow said, and is a potential acquisition target. However, Bear Stearns downgraded ISE shares to "Peer Perform" from "Outperform," saying the stock has moved past its $44 price target and there are few pricing catalyst looming near-term.
Shares of ISE fell $2.51, or 5.7 percent, to $41.87 on the Big
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