CBOE: Zacks’ Bear of the Day Play

I almost feel guilty about writing a Bear of the Day with a big Chicago company as the subject. I’m about as Chicago as it gets from the Cubby blue on my head to the Italian Beef I had for lunch today, to the Jordan’s on my feet. But it’s hard to argue with analyst estimate revisions that have been coming down.

CBOE Holdings (CBOEAnalyst Report) is the holding company for the Chicago Board Options Excange which is an options exchange which operates as an organized marketplace for the trade of standardized, listed options on equity securities. CBOE offers equity, index, and ETF options, including proprietary products such as S&P 500 options and options on the CBOE Volatility Index, better known as the VIX.

Management has been happy with the increase in VIX options volume over the last two months. They view this segment of their business as the greatest growth opportunity for the future. They also have a number of planned product extensions they believe could lead to increased volume. Among those are plans for a VIX-style contract for a variety of indexes such as the Russell 2000, the FTSE 1000 and others.

This optimism hasn’t translated through to the analysts covering the stock. Over the last thirty days, five analysts have dropped their earnings estimates for the current year while six have done so for the next year. The bearish revisions have dropped the Zacks Consensus Estimate down from $2.45 to $2.17 for the current year and down from $2.84 to $2.51 for next year.

The downward revisions have hit the stock price as of late. After rallying from near $46 during July 2014 to a 52-week high over $67, shares have retreated. Selling off most of this year the stock price has fallen down to a low just above $55. Shares have traded in a tight range between $58 and $60 for the last two weeks as the stochastic indicator has come down from over 80 to 68.42. This gave a stochastic “Sell” signal as the bearish crossover occurred earlier this month.

The securities exchange industry current ranks in the Bottom 32% of all the industries we rank with our Zacks Industry Rank. Investors looking for stocks within the same industry can look at Zacks Rank #1 (Strong Buy) Marketaxess (MKTXAnalyst Report). Other industry members such as the CME Group (CMEAnalyst Report) are currently a Zacks Rank #3 (Hold).

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