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NYSE Slips on Downgrade

The scorching shares give back a little ground.

Shares of

NYSE Group


took a bit of a tumble on Wednesday after one analyst downgraded the stock.

Ken Worthington, an analyst at JPMorgan Chase, cut his rating on the parent company of the

New York Stock Exchange

, to neutral from overweight.

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The exchange's valuation is getting too high, he says. He believes investors have already priced into the stock the launch of the hybrid market, selective price increases and acquisitions, Worthington says.

Shares of NYSE are trading at 41 times his 2007 earnings estimate of $2.48 a share. Shares have more than doubled over the last year as exchanges of all stripes have run up sharply.

"We continue to like the prospects for NYSE's business, although our enthusiasm for its stock has moderated," Worthington writes. NYSE "will be a global exchange winner -- it will claw back lost U.S. equity market shares and will continue to make acquisitions."

Yet, at $101 a share, "we feel the risk/reward is far more balanced than when the stock was trading in the low $60s," he writes.

The stock is not without risks, Worthington cautions. The Euronext deal is "subject to both regulatory and integration setbacks," he writes.

Competition is also set to increase in the U.S. "Brokers may have an incentive following the implementation of Reg NMS to direct some orders to regional exchanges in order to fulfill best execution obligations," Worthington writes. ECNs are also likely to roll out "listed" execution services, and "dark pools will likely gain share as investors focus on reducing market impact costs."

Shares fell $1.48 to $99.72.