- Deep valuation discount vs. major US and EU exchanges.
- Growth of recurring revenues to 63% of FY 2025 sales tilts the business defensive while also benefiting from sensitivity to a likely higher volatility environment ahead.
- Price at technical support level, with rich volatility favouring call spreads for upside.
Deutsche Börse (DB1) shares have fallen c.30% from their all-time high in 2Q25, driven by softer YoY trading revenues in 2H25, reflecting subdued volumes in derivatives, amplified by tough comparables from a robust 1H25 that was boosted by elevated market volatility surrounding US tariff announcements and related trade uncertainties.
The stock currently trades at the lower end of its historical valuation range (PE 16.6x, a 12% discount to its 5Y average) and at a 20% discount to its large US and European exchange peers (average 10%). This appears conservative as consensus implies just a 5% revenue CAGR through 2028 (company's target is 8%), with the delta mainly driven by a 6% CAGR for the Trading & Clearing segment (c.40% of revenues) ahead of a likely higher volatility environment usually associated with midterm election years, on top of the ongoing geopolitical tensions. Moreover, the strong recurring revenue base (c.63%) underpins resilient cash flows, enabling sustained distributions and more accretive M&A.
Given the rich volatility (6M ATM IV 3YPc98) we look to play the upside in the name via call spreads and propose Long Sep26 220/240 call spreads costing 2.5% of underlying (Spot ref: 205.7, Fwd. 205.2) with a max payout of 4x net premium employed.