Citi has reinstated coverage on Bats Global Markets Inc BATS with a Neutral rating ahead of the company’s third-quarter results on November 3 and following its deal to be acquired by CBOE Holdings, Inc CBOE for about $3.2 billion.
“While we see the company well positioned as a market share gainer in transaction based businesses combined with potential strong revenue growth in non-transaction businesses, we think the risk/reward is largely balanced at current levels,” analyst William Katz wrote in a note.
In addition, the analyst cut his volume assumptions of Hotspot on more muted FX industry outlook, despite being positive on product fundamentals. Aside from forex, Katz sees upside from U.S. Equities, U.S. Options, European Equities and synergies from recent Hotspot transaction.
“However we believe absolute multiple expansion will be capped due to significant B/S leverage, small initial float, mixed capital return policy and revenue concentration to U.S. Equities,” Katz added.
That said, the analyst raised his price target to $30.50 from $29, while the shares are almost flat at $29.65.
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