CME Group Inc (NASDAQ:CME) shares received an upgrade to ‘Buy’ from ‘Hold’ from the analysts at Citi on Thursday, saying the stock represents a positive risk/reward at current levels given catalysts ahead, the capital return story and defensive nature of the platform.
They have a target price of US$300 on stock, implying an estimated total return of 18%.
“We see a similar setup to 3Q 2024; soft performance over the course of 3Q, numerous catalysts ahead (UST clearing, OSSTRA, Fanduel) over the coming months which we expect to provide support/upside," the analysts wrote.
Citi analysts noted that CME has faced headwinds from lower volumes as rate/energy volatility has come under pressure, but historically stock weakness on low volumes has provided decent entry points to acquire the company’s shares.
They also see a robust capital return outlook over the next four months, with an estimated $3.3 billion to $3.6 billion from cash on hand/future generation and OSSTRA proceeds to be returned to shareholders in the form of stock buybacks and dividend increases.