The recent surge in market volatility is beneficial to Cboe Global Markets, which owns the Chicago Board Options Exchange and the stock exchange operator BATS Global Markets, according to Goldman Sachs capital markets analyst Alex Blostein.
The bank is predicting a 31 percent gain for Cboe’s stock over the next 12 months. Shares of Cboe have plummeted more than 30 percent in the past 12 months.
“Investor expectations for VIX growth have rebased. … Momentum in S&P 500 options is underappreciated amid increased demand for institutional hedging, share gains against other listed products, and cyclical upturn in equity volatility,” Blostein said.
His earnings per share estimates for 2019 and 2020 are $5.24 and $5.75, 6 percent and 8 percent, respectively, above FactSet consensus.
LPL Financial is the bank’s top pick among small- to mid-cap brokers given its improving organic growth, favorable mix shift between channels and growth in cash balances.
Goldman Sachs sees 9 percent upside for LPL over the next 12 months. LPL beat the market last year, posting a 6.9 percent gain while the S&P 500 was down 6 percent.