Why Intercontinental Exchange Is A Core Equity Holding

Intercontinental Exchange (ICE) - 01/06/2020
Stock Price: $95.67
Market Cap: $153B
Forward P/E: 22.38
Dividend Yield: 1.16%
TSC Core Equity Portfolio Weight: 2%
Price Target(s): $118, $130 (+24%, +37% upside potential)

Fundamentals
  • ICE owns and operates a sticky, high barrier to entry, recurring revenue, data rich suite of stock, commodity, and fixed income exchanges across the globe, with the NYSE being their crown jewel.
  • Energy markets should continue to attract a high number of hedgers and speculators, positioning ICE to profit from continued volume growth.
  • Operating expense discipline has been a strength of ICE's management team, even after stomaching a series of acquisitions.
  • ICE has consistently grown its dividend 20% per year since paying its first dividend.
Technicals

  • Shares of ICE have been in a well defined uptrend since its IPO in late 2005. The stock hasn't experienced much volatility since the great recession, and applying fibonacci extensions from the 2007 high and the 2009 low generates a $130 price target, representing +37% upside from current trading levels.
  • Shorter term, shares of ICE have formed an ascending triangle and the stock is on the verge of breaking above overhead resistance at $95. A decisive break to new all time highs would trigger a measured move price target of $118, representing +24% upside from current trading levels.



Risks

  • A decline in trading volume is the biggest risk ICE faces. While volatile markets are beneficial to ICE (heightened trading), a  prolonged draw-down could see volume dry up and significantly impact a good chunk of ICE's revenue. 

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