Morgan Stanley Double-Upgrades Cboe After S&P Contract Extension

Morgan Stanley double-upgraded Cboe Global Markets to overweight from underweight and lifted its price target to $358 from $258 after the exchange operator extended its S&P Dow Jones Indices contract through 2051.

The extension gives Cboe exclusive rights to list and offer trading in options on the S&P 500 Index. The agreement addresses a key concern behind the previous underweight rating as options growth has proved more durable than expected.

Cboe also plans to launch company-specific key performance indicator prediction markets. Those products could provide additional value beyond the current earnings estimates, which do not include contributions from the prediction-market business.

Morgan Stanley raised its Cboe earnings-per-share estimates by 16% for the first of the next two years and 18% for the second. The changes reflect stronger trading volumes, improved revenue capture and lower expenses.

Cboe shares have gained 17% this year. Seven of 19 analysts rate the stock Buy, while 11 rate it Hold.