Credit Suisse: Buy Investment Technology Group, Dark Pool Business Is 'Underappreciated'

In a report published Friday, Credit Suisse analyst Ashley N. Serrao initiated coverage of

with an Outperform rating and price target of $29. The analyst believes that the company's global dark pool offering is an underappreciated asset with "secular and cyclical tailwinds." "Secularly, we believe ITG will be able to leverage its duopolistic position to make further inroads into the dark pool arena given rising demand for block liquidity and regulation favors block trading in the U.S. and Europe," analyst Serrao elaborated. On the cyclical front, the analyst believes that Investment Technology Group is protected from exposure to Greece, since it derives its trading revenue from the value trading, instead of the number of shares. The company appears well positioned to witness growth in Europe. The analyst also expects the company to buyback 20 percent of its market cap over the coming two year. "[W]e see three free options 1) the opportunity to free up ~$50 million in capital in Asia by migrating from self-clearing to an outsourced solution 2) the opportunity to lever up to pursue highly accretive M&A and 3) success in growth initiatives in FX," analyst Serrao added.