Morgan Stanley: Shares of Cboe Global Markets (CBOE) fell 6.4% to $198.58 in early trading after Morgan Stanley downgraded the exchange operator’s stock to “underweight” from “equal-weight,” with a price target of $199. The downgrade stems from concerns over Cboe’s growth trajectory and its premium valuation, despite reporting better-than-expected Q3 earnings last week.

Morgan Stanley analyst Michael J. Cyprys warned that market volatility is expected to ease post-election, which could lead to lower trading volumes and decelerate Cboe’s earnings growth. The firm also highlighted that Cboe’s valuation is currently priced for high revenue growth, but risks of slower growth and margin stability may put downward pressure on the stock price. Cboe’s price-to-earnings ratio of 22x for 2026 earnings is above its historical average and 7% higher than its peers, including Nasdaq (NDAQ), CME Group (CME), and Intercontinental Exchange (ICE), which offer stronger growth and higher margins.

The downgrade comes as Cboe faces challenges with its growth initiatives, which may take time to bear fruit, while its strategy for mergers and acquisitions (M&A) could also limit stock upside. Despite these concerns, Cboe’s stock has gained about 11% year-to-date.

Morgan Stanley’s downgrade adds to a mixed outlook for Cboe, with five of 18 analysts still rating the stock as “buy” or higher, and the median price target standing at $217, according to LSEG data.

As Cboe’s stock faces downward pressure, the broader exchange sector also saw declines, with CME, Nasdaq, and ICE all slipping in early trading.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult a qualified financial advisor or conduct your own research before making investment decisions.