Pali Research Upgrades IntercontinentalExchange (ICE) to Buy

October 30, 2009 6:51 AM EDT

Pali Research upgrades IntercontinentalExchange (NYSE: ICE) to Buy.

Pali analyst says, "We believe ICE weakness on WTI concerns is overblown and we see it as a buying opportunity given the improving fundamental story (in OTC business) and leverage in 2010 from better CDS environment. We are upgrading to Buy as we see 20%+ upside from current levels given our current fundamental outlook...With continued new product development and stronger natural gas activity, we would not be surprised if 2010 OTC commissions came in closer to $1.5-1.7m in 2010. When ICE’s OTC natural gas volumes were last at these levels (2Q08) revenues ran at $1.25m, before ICE captured clearing revenues, which would have boosted revenues by roughly ~30%. Every $50k upside to our estimate translates into ~ $0.07 of EPS...Crude trading continues to perform as well.

"We are raising our 2009/2010 EPS estimates by 1% and 5% to $4.33 and $5.50, respectively. Our 2010 EPS estimate moves higher on improved OTC and credit trading outlooks. Our $118 price target equates to 21.5x our 2010 EPS estimate and represents 18% upside from current levels."

To see more analyst ratings on ICE Click Here.

IntercontinentalExchange, Inc., through its subsidiaries, owns and operates an Internet-based global electronic marketplace for trading in futures and over-the-counter (OTC) commodities, and derivative financial products in the United States, the United Kingdom, and Canada.

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