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Intercontinental Exchange Inc. (NYSE:ICE) is ready to sizzle, riding a wave of structural tailwinds and cyclical recoveries that promise substantial gains. As a key player in the financial and commodities markets, the exchange promises an exciting growth trajectory that investors won't want to miss.
Goldman Sachs‘ analyst Alexander Blostein has upgraded Intercontinental stock to a Buy from Neutral, setting a 12-month price target of $167, indicating a potential 22% upside from a price of $136.89.
Anticipated earnings per share (EPS) growth backs this optimistic forecast. After experiencing less than 10% EPS growth over the past three years, Blostein expects Intercontinental’s EPS to climb into the low teens by 2025 and beyond.
Blostein expects the energy market to fuel over 25% revenue growth for the exchange in 2024, with an estimated 8%-10% growth in subsequent years. The market alone, account for about 30% of Intercontinental's earnings.
Intercontinental's robust performance in energy is driven by the globalization of natural gas and LNG and a broadening customer base. The firm's success with new products and a favorable revenue per contract (RPC) mix shift are further enhancing its growth.
A 30% increase in open interest across oil and natural gas has driven Intercontinental stock's recent gains, noted Blostein. This indicates strong product adoption even amid lower energy volatility.
AI-driven demand for power should provide additional tailwinds over the long-term to the exchange's natural gas growth strategy.
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Blostein also highlights promising developments in the company's fixed-income data and analytics segment, which makes up about 22% of its earnings. The firm's annual subscription value (ASV) is recovering and flows into fixed-income funds are rebounding year-to-date, signaling accelerated growth in this area.
The mortgage technology segment, accounting for 16% of earnings, is emerging from a “cyclical trough”. With origination activity stabilizing and Intercontinental's organic initiatives gaining momentum, Blostein anticipates high single-digit to low double-digit revenue growth in 2025 and 2026.
Bolstein expects Intercontinental's high-margin exchange revenues to support an approximate 100 basis point annual expansion in operating margins.
Coupled with strong free cash flow conversion, this is likely to speed up de-leveraging and bolster share repurchases by the end of 2024.
Intercontinental’s strategic position and growth prospects make it a compelling buy for investors looking to capitalize on the upcoming surge.
Overall, Intercontinental Exchange appears set to deliver substantial returns, on the back of:
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Posted In: ICE
