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Goldman upgrades CME, downgrades Cboe

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Goldman upgrades CME, downgrades Cboe

Goldman Sachs analyst Alexander Blostein has upgraded CME Group Inc. to "buy" from "neutral" while downgrading shares of Cboe Global Markets Inc. to "neutral" from "buy."

Blostein said in a note to clients that he expects CME's revenue to accelerate in 2018 and 2019 due to growth in open interest and the increasing probability of normalization of volatility. The analyst raised his price target on the company to $180 from $160. He also raised his EPS estimates to $6.79 from $6.33 for 2018 and to $7.26 from $6.83 for 2019.

For Cboe, the Goldman analyst said the unwind in the company's VIX ETP products will likely weigh on its VIX futures franchise. Blostein believes that this issue in particular will create headwinds to the firm's top-line growth and will potentially affect the stock's valuation.

JPMorgan also downgraded Cboe due to concerns over relative interest in the VIX product, which accounts for about a quarter of the company's total revenues.

Goldman's Blostein cut his price target for Cboe's shares to $115 from $140. He also lowered his EPS estimates by 6% in 2018 and 11% in 2019 to reflect lower VIX futures volumes.