KBW says buy the dip on CME Group shares, says perpetual futures fears are overblown
CME Group is poised to rebound, even as the company prepares to fight federal regulators in court , so investors should scoop up shares while they’re cheap, according to Keefe, Bruyette & Woods. The investment firm upgraded the exchange name to outperform from market perform. It maintained its $305 price target on shares, implying 21% upside from Wednesday’s close. “We have seen a downward acceleration in recent weeks, which is creating an attractive risk/reward,” analyst Chris Allen said Thursday in a note to clients. “The pressure has been driven by perceived perpetual futures risk, which we believe is overblown in general for exchanges and CME specifically given its low retail exposure and index licenses in equities products.” CME Group has declined nearly 8% in the year to date and 17% over the past month, largely due to its bid to embrace perpetual futures — an initiative that has caused the firm to butt heads with the Commodity Futures Trading Commission. CME YTD mountain CME year to date Perpetual futures contracts are a financial derivative that enables traders to bet on the price action of a particular asset without holding it. The contracts do not have expiration dates and often boast massive leverage, posing risks to investors and broader markets. On Wednesday, CME Group told CNBC’s ” Fast Money ” that it plans to sue the CFTC over its approval of perpetual futures contracts. “You know me, I’m always up for a good battle,” CME Group CEO Terry Duffy said. “We will be filing this litigation tomorrow because we are not taking this lightly. I’m not trying to pick a fight with anybody. I’m just trying to state the law. So it’s not personal, just trying to state the law.” Keefe, Bruyette & Woods’ call falls in line with consensus on Wall Street. Of the 17 analysts covering CME Group, 8 have a buy or strong buy on the stock, LSEG data shows.
