UPDATE: Goldman Sachs Upgrades CME Group on Limited Further Upside

In a report published Monday, Goldman Sachs analyst Alexander Blostein upgraded the rating on CME Group CME from Sell to Neutral, and raised the price target from $50.00 to $70.00.

In the report, Goldman Sachs noted, “We upgrade shares of CME to Neutral from Sell. Despite the stock's significant outperformance in June (+14% vs.XLF), a sustained level of interest rate volatility is likely to keep volumes elevated, driving EPS revisions higher in the coming months. Specifically, compared to 2Q12, CME's total volumes are up 12.5% this quarter, with 90% of the increase driven by the Rates complex, primarily the firm's Treasury business. With the yield curve likely steepening further, history suggests rate volumes could remain elevated. Moreover, weak volumes in 2H12 create easy y/y comps for the firm, which could lead to additional EPS upside versus Street expectations. While we continue to think revenue potential from OTC clearing will ultimately disappoint (CME's market share of cleared volumes remains in mid-20% versus LCH since the onset of Category 2 clearing on June 10), robust volumes at CME's core business trump this issues, in our view.”

CME Group closed on Friday at $76.79.