Intercontinental Exchange upgraded on planned Black Knight acquisition

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By Sam Boughedda 

BofA analysts upgraded Intercontinental Exchange (NYSE:ICE) to Buy from Neutral, raising the firm's price target on the stock to $132 from $116 in a research note Thursday.

The analysts told investors that ICE's earnings growth trajectory and quality are strengthened by its planned $13.1 billion acquisition of Black Knight Inc. (NYSE:BKI).

"While we have become more cautious on the exchange industry (NDAQ downgrade last month + CME rated Underperform) versus the Alts & Brokers, we are more bullish on ICE relative to its peers. This is driven by our positive view on ICE's long- term growth trajectory and improving earnings quality, both of which will be strengthened by the BKI deal," the analysts explained. "We believe the BKI deal will transform ICE into a one-stop shop in the US residential mortgage market."

They added that "the mortgage refi headwind is now mostly behind ICE," while they believe there is a "largely untapped, multifaceted synergy opportunity" between mortgage tech and its futures, index, and data businesses.

"In late 2021, our outlook on ICE was more cautious due in part to the anticipated headwind from higher interest rates on its mortgage technology business. However, we see minimal incremental downside going forward with the refinancing drop now mostly behind us and the higher mix of recurring revenues in Mortgage Tech (60% today, 85%+ post-acquisition)," wrote the analysts.

Intercontinental Exchange shares are down 1% at the time of writing on Thursday.