Jefferies LLC's analyst Daniel Fannon has initiated coverage of trading and market-making company Virtu Financial Inc.'s stock with a "buy" rating and a 12-month price target of $37.
According to Fannon, Virtu's business model will continue to benefit from the higher market volatility currently prevailing in the macro environment. The Cboe Volatility Index, has averaged 16.6 in the second quarter, down slightly from the 17.2 average in the first quarter but much higher than the low level of 11.9 in the second quarter of 2017, Fannon wrote.
Fannon also pointed to the Markets in Financial Instruments Directive II, or MiFID II, regulatory framework in Europe, which could stimulate the company's global competitive positioning.
The analyst also wrote that the company's acquisition of Virtu KCG Holdings LLC will continue to produce accretion, expense synergies and capital efficiencies. The company also has the opportunity to expand its fixed-income, currencies and commodities segment in the long-term, Fannon said.
The analyst introduced EPS estimates for 2018 and 2019 of $2.28 and $2.30, respectively.
