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Sandler O'Neill & Partners, Morgan Stanley expect Bats Global Markets to see strong growth

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Sandler O'Neill & Partners, Morgan Stanley expect Bats Global Markets to see strong growth

Sandler O'Neill & Partners and Morgan Stanley initiatedcoverage of Bats Global MarketsInc.

Sandler O'Neill & Partners analyst Richard Repetto gaveBats Global Markets a "hold" rating based only on valuation as hesees the company as "a unique growth story within the exchangeindustry," according to a May 10 note.

Repetto noted the company's role as"disintermediator" as it expanded its market share through organicgrowth and acquisitions. He lauded the "playbook" that allowed it togain leading positions in the U.S. and European equities, U.S. options andglobal foreign exchange. In addition, he cited the company's low costinfrastructure that allows it to be profitable. He sees growthopportunities for the company, noting its planned expansion in the U.S. equityoptions and global foreign exchange.

The Sandler O'Neill & Partners analyst's price target onBats Global Markets is $28. His adjusted EPS estimates are $1.34 for 2016 and$1.46 for 2017.

Morgan Stanley analyst Betsy Graseck started coverage of BatsGlobal Markets with an "equal-weight" rating, saying the company is a"great hedge for choppy markets." She noted that exchanges usuallysee higher volumes in a volatile market, boosting their net transaction revenue.

Graseck expects the company's revenue compound annual growthrate to benefit from its low cost entry strategy as it expands into tradeexecution for new products in foreign exchange and U.S. equities options.

Graseck's price target on Bats Global Markets is $26. HerEPS estimates are $1.13 for 2016, $1.37 for 2017 and $1.66 for 2018.