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Deutsche Bank Sees Growth In Exchanges, Initiates BATS

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Deutsche Bank Sees Growth In Exchanges, Initiates BATS
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Deutsche Bank’s Brian Bedell believes that Bats Global Markets Inc (NYSE: BATS) stock is fairly valued at present, trading at a 17 percent premium to the S&P 500 and in-line with the U.S. exchange group. He initiated coverage of the company with a Hold rating and price target of $26.

Compelling Growth Story With A Higher Risk

Bedell believes Bats Global Markets is poised for multi-year annual double-digit organic earnings growth, while its larger exchange peers are expected to record slower growth.

The analyst mentioned, however, that the company’s relatively higher exposure to mature and fragmented cash equities markets in the U.S. and Europe make it more exposed to risks of market structure changes.
Although such risks appear benign for now, they can resurface in future, Bedell noted.

Growth Drivers

Bedell expects Bats Global Markets to generate robust double-digit EPS growth each year through 2018 driven by its various growth initiatives.

The key growth drivers identified by the analyst are:

  • Boosting the share of U.S. equity options by expanding from price/time model into markets such as pro-rata [4Q15], auctions [2H16] & complex orders [2017].
  • Growing share of US equities trading via growth of ETF listings.
  • Creation of more proprietary market data products across its four businesses.
  • Deepening penetration in vast FX trading market via new London center, pricing initiatives & new products.

Bats Global Markets is also expected to benefit from greater global market volatility and growth in ETFs.

Latest Ratings for BATS

DateFirmActionFromTo
Oct 2016CitigroupReinstatesNeutral
Oct 2016JefferiesMaintainsHold
Sep 2016Goldman SachsMaintainsNeutral

View More Analyst Ratings for BATS
View the Latest Analyst Ratings

Posted-In: Brian Bedell Deutsche BankAnalyst Color Initiation Analyst Ratings

 

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