Story updated at 10 a.m. to reflect market activity.
IntercontinentalExchange fell -2.4% to $187.61 in morning trading.
The firm reiterated its "buy" rating for the stock. UBS analyst Alex Kramm said the price target decrease was driven by lowered volume outlook, which reflects current weakness.
"ICE's shares underperformed significantly following 1Q14 results," Kramm wrote. "While quarterly results were solid, we believe investor focus was on confusing expense guidance and a tough volume environment so far in the 2Q (read: downward estimate revisions). While we certainly would have welcomed incremental synergy realization, we stress that the company's cost guidance is essentially unchanged, and we remain highly confident that ICE will deliver on synergy targets if not exceed them over time. Current volume trends certainly create a headwind, but we do not believe secular growth trends are broken, and volumes are poised to snap back as volatility increases again. At less than 15x our FY15 EPS estimate, we believe ICE offers attractive risk/reward at current levels."
Separately, TheStreet Ratings team rates INTERCONTINENTALEXCHANGE GRP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate INTERCONTINENTALEXCHANGE GRP (ICE) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, solid stock price performance, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ICE's very impressive revenue growth greatly exceeded the industry average of 5.5%. Since the same quarter one year prior, revenues leaped by 89.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has slightly increased to $173.17 million or 8.06% when compared to the same quarter last year. Despite an increase in cash flow, INTERCONTINENTALEXCHANGE GRP's cash flow growth rate is still lower than the industry average growth rate of 45.44%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- INTERCONTINENTALEXCHANGE GRP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, INTERCONTINENTALEXCHANGE GRP reported lower earnings of $4.03 versus $7.52 in the prior year. This year, the market expects an improvement in earnings ($10.89 versus $4.03).
- You can view the full analysis from the report here: ICE Ratings Report