Color on NYSE Euronext (NYX) Upgrade at Deutsche Bank

Deutsche Bank upgrades NYSE Euronext (NYSE: NYX) from Hold to Buy and raises its price target from $77 to $86.

The firm said NYSE Euronext's strong Q1 earnings "reflected strong linked quarter positive operating leverage", as revenues were up 9% and expenses were down 6%. Deutsche points out that the majority of NYSE Euronext's growth is coming from Europe, but believes that cost cutting initiatives over Q2 and Q3 could strengthen the company's U.S. operations.

While Deutsche does see possible pricing compression in '08, the firm believes estimates on NYSE Euronext are simply too low now that synergies from the merger with Euronext are finally becoming apparent in earnings.

In addition to slowing growth in derivatives volumes, Deutsche also expects pricing pressures to affect equities and options in the U.S. and Europe. At the same time, the firm believes investors have "gotten too pessimistic" on NYSE Euronext.

Deutsche raised its FY08 and FY09 EPS estimates on NYSE Euronext to $3.70 and $4.40, respectively. The Street is currently estimating $3.30 for FY08 and $4.16 for FY09.

As NYSE Euronext is trading around $75.50 today, Deutsche's $86 price target represents a potential gain of about 14% from current levels.

NYSE Euronext, through its subsidiaries, offers various financial products and services. It provides securities listing, trading, and market data products and services. [BCS]

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