Argus Upgrades Intercontinental Exchange To Buy

• Shares of Intercontinental Exchange Inc ICE have appreciated 2 percent over the past one year, reaching a high of $266.94 on February 1.
• Argus’ Stephen Biggar has upgraded the rating on the company from Hold to Buy, with a price target of $270.
• Biggar believes the sell-off following the company’s 4Q earnings report was overdone, with the pullback in the stock offering an attractive entry point.

Analyst Stephen Biggar mentioned that the sell-off in the stock might have been driven by the reduction in the consensus forecasts and management’s higher than anticipated expense guidance, associated with the company’s new growth initiatives.

Biggar also believes that “the slight reduction in the consensus earnings estimate as a one-time event that does not change the company’s broad growth story or its prospects for synergies” from the Interactive Data Corp acquisition.

Going forward, the analyst expects the consensus forecasts to stabilize or even move higher, driven by robust trading volumes in Intercontinental Exchange’s risk management products and merger related synergies.

According to the Argus report, the Interactive Data Corp acquisition fits “nicely with ICE’s plans to expand its data business. However, ICE will need to generate significant synergies from IDC to justify the relatively high acquisition price of $5.2 billion.”

Biggar expects the company to generate revenue growth of 27 percent in 2016, including high single digit organic growth as well as robust contribution from the recent acquisition.

The EPS estimates for 2016 and 2017 have been raised from $14.10 to $14.27 and from $15.73 to $15.94, respectively.