Intercontinental Exchange (NYSE: ICE) is a stock that's underperformed since the June 2, 2009 Buy recommendation at a price of $115.15 per share. But so far, place ICE in the category of a 'tired stock,' not a 'broken company,' hence I'm Reiterating the June Buy rating. Here's why:
As noted, while FY2009 revenue and earnings will not overwhelm, look for electronic trading, energy products trading, and clearing house function revenue streams to resume solid growth by mid-FY2010.
Further, ICE's Europe operations remain a market with a large potential upside. Also, forecasts that the de-leveraged, post-financial crisis era would slow energy product trading volumes to a crawl appear to have been premature: oil futures and related products are hanging in there, and a sustained rebound in oil prices in FY2010 would bolster that trend. Agriculture futures revenue should also register impressive gains in FY2010.
Technically, ICE's pull-back to the $80 range, following a rise from $50 to $120, looks like a correction: the long-term uptrend remains intact. The First Call FY2009/FY2010 EPS estimates for ICE are $4.41 to $5.16.
Stock Analysis: Intercontinental Exchange is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in ICE now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your ICE position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $45.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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