Cboe Global Markets, Inc. — 7.85/10 — $282.47
Cboe Global Markets operates financial exchanges across five segments — Options, North American Equities, Futures, Europe and Asia Pacific, and Global FX — plus the cross-segment Cboe DataVantage market-data business. The company's economic engine is narrow but extraordinarily deep: its proprietary SPX/VIX/Mini-SPX/Russell 2000 index options franchise, licensed near-exclusively from S&P Dow Jones Indices, runs at a ~98% market share and generates roughly 47% of total net revenue. That franchise is still accelerating — SPX average daily volume set records every quarter this review (0DTE penetration now 61% of SPX volume, up from 51% a year ago), with real pricing power (rate-per-contract +19% YoY). The remaining ~53% of revenue — multi-listed options, cash equities, futures, and FX — is genuinely fragmented and price-taking, and Cboe's own multi-listed options share has been eroding to MIAX.
Net revenue growth has accelerated for six straight quarters (+10.0% to +29.0% YoY), with Adjusted EBITDA margin expanding every quarter (63.2% trough to 74.7% in Q1 2026) as a multi-quarter portfolio realignment — exiting Japan equities, winding down the European derivatives exchange ("FedEx"), selling the Australia/Canada equities businesses, and cutting ~20% of the workforce — strips out non-core drag. Annual free cash flow nearly tripled from FY2021 ($545.8M) to FY2025 ($1,681.6M), funding buybacks (diluted shares down every year for five years) and dividends from a net-cash balance sheet. CEO Craig Donohue (in the role since May 2025) and new COO Scott Johnston (his first earnings call was Q1 2026) are executing a genuine beat-and-raise pattern (~89% guidance hit rate), but neither has a multi-year track record yet. The next leg of growth — securities-based event/prediction-market contracts, positioned as "a stepping stone to basic options trading" — is explicitly contingent on an unresolved SEC/CFTC jurisdictional question that management itself calls "hopeful and optimistic," not resolved.
| CEO | Craig Steven Donohue (since May 2025) | Market Cap | ~$29.56B |
| Revenue Mix | ~47% index options (SPX/VIX monopoly), ~53% fragmented/price-taking | Q1'26 Net Revenue | $728.9M (+29.0% YoY, record) |
| FCF (FY2025) | $1,681.6M (~69% margin, +61.7% YoY) | Analyst Consensus | Hold (2 Strong Buy / 12 Buy / 13 Hold / 4 Sell); target $306 |
| Fiscal Year End | December 31 | Quality Gate | PARTIAL PASS (1 NO — management track record) |
PARTIAL PASS — 1 NO. No cap applied (one NO means score normally, gap noted).
| Oligopoly position (>30% share)? | YES — ~98% share in SPX/VIX/Mini-SPX/Russell index options via an exclusive S&P DJI license (~47% of net revenue), clearing the 30% threshold by roughly 3x. | Positive and growing FCF? | YES — FCF grew every year FY2021-FY2025 ($545.8M to $1,681.6M), nearly tripling; margin expanded from ~37% to ~69% of net revenue. |
| Management 3+ year track record? | NO — CEO Craig Donohue has ~14 months of tenure; COO Scott Johnston (external hire) took the seat in Q1 2026. Only 4 gradeable quarters exist (~89% hit rate) — strong, but not a multi-year record, and it coincides with turnover in two of three senior operating seats. |
| Dimension | Score | Weight | Weighted |
|---|---|---|---|
| Financial Trends | 9 | 25% | 2.25 |
| Thematic Exposure | 8 | 35% | 2.80 |
| Management Quality | 7 | 20% | 1.40 |
| Investor Sentiment (Inverted) | 7 | 5% | 0.35 |
| Concerns / Catalysts / Risks | 7 | 15% | 1.05 |
| Composite | 100% | 7.85 |
Cboe scores 7.85/10 — BUY, a narrow-but-powerful oligopoly compounder. The SPX/VIX index-options franchise — ~47% of revenue, ~98% share, exclusively licensed from S&P Dow Jones Indices through roughly 2032 — sits inside an accelerating options/0DTE secular theme (net revenue +29.0% YoY, Adjusted EBITDA margin +680bps YoY in the most recent quarter) funded by nearly-tripled free cash flow (FY2021-FY2025) and a net-cash balance sheet, and trades at a real discount to CME, ICE, and Nasdaq on EV/EBITDA.
The composite is held back from the 8-9 range by two connected factors. First, the management-track-record gate fails: CEO Craig Donohue has only ~14 months in the role, and COO Scott Johnston (an external hire) took the seat as recently as Q1 2026 — a strong ~89% guidance hit rate so far, but not yet a multi-year record. Second, that same young management team is the one making the company's most contrarian call — that securities-based event/prediction-market contracts are "a stepping stone to basic options trading" — against a Hold-rated Street and an SEC/CFTC jurisdictional question management itself calls unresolved.
Key question: does the SPX/VIX monopoly's continued acceleration (record ADV every quarter, real pricing power) keep compounding fast enough to carry the stock while the market waits for (a) a longer track record from the new CEO/COO pairing and (b) regulatory clarity on the event-contracts growth leg — or does the ~2032 SPX license horizon and the fragmenting, price-taking ~53% of revenue cap the re-rating first?
Key catalysts and monitoring points:
- Event/prediction-markets launch and SEC/CFTC clarity — Cboe is targeting a Q2 2026 XSP-based binary/vertical-spread launch, "subject to regulatory approval." Management's own words ("hopeful and optimistic... not resolved") flag this as a genuine open risk, not a formality — watch for an actual SEC/CFTC ruling.
- Australia/Canada sale close — a definitive agreement is in place; $40-50M of annualized savings are not yet in 2026 guidance and depend on separate regulatory approvals in each jurisdiction.
- Management track record build — CEO Donohue and COO Johnston are ~14 months and ~5 months into their roles respectively; each additional clean guidance cycle strengthens (or breaks) the case for the managementTrackRecord gate to flip to YES.
- Multi-listed options share erosion — Cboe's multi-listed options share fell from 25.0% to 22.9% over 2025 as MIAX grew; watch whether this fragmenting sub-segment stabilizes or keeps eroding.
- DataVantage growth durability — three straight quarters of analyst skepticism on whether ~19% YoY growth is a sustainable new baseline or partly lumpy one-time data-set sales; management has not yet called it a new baseline itself.
- SPX license horizon — analysts are already asking about competition for the SPX contract around its ~2032 exclusivity expiry; a multi-year, not near-term, watch item.