Jefferies Lowers Price Target On CME, Still Sees 36% Upside (CME)

Jefferies & Co. is out with a research report saying to buy shares of Chicago Mercantile Exchange CME, despite weakness in trading volumes. On a result of lower trading volumes, Jefferies is cutting its price target to $340, but is keeping its Buy rating. The $340 price target is roughly 36% higher than yesterday's close. In a note to clients, Jefferies writes, "At 14.8x our 2011 EPS estimate, CME is trading near historical lows. Only from 4Q08 through 1Q09 at the height of the financial crisis did the P/E ratio trade lower, in the range 12-13x. Since 2Q09, CME's multiple has averaged approx. 1.4x that of the S&P 500. However, this difference has compressed considerably in recent months with CME now trading at only 1.2x the S&P 500 multiple versus approx. 1.40x at the end of April. While recent volume trends have been subdued, the company's customer base remains stable-to-healthy, longer term growth opportunities within its core product set (i.e. interest rates) and new product initiatives (i.e. OTC products) are compelling and margins and cash flow generation remain strong." Shares of CME gained $5.03, good for a gain of 2.05%, to close at $250.92 yesterday.