London Stock Exchange Group upgraded ahead of results
Analysts have upgraded London Stock Exchange Group as investors prepare for the bourse’s full-year results next week, with hopes that a further share buyback programme will be announced.
In a research note today, RBC Capital Markets analysts upgraded the London Stock Exchange Group’s target price from 11,600p to 12,500p.
The stock is currently sitting at 11,680p, and has risen more than 32 per cent in the last year.
“Despite strong recent performance, we believe the shares are well positioned to perform over 2025, with earnings per share growth and re-rating potential both serving as potential drivers,” said RBC analyst Ben Bathurst.
Bathurst added that a rise in deregulation and uncertainty worldwide following Donald Trump’s election to the US presidency should both be boons to the bourse, as data becomes increasingly necessary to understand financial markets.
Despite constant fears over the number of firms delisting from the London Stock Exchange, the company brings in less than four per cent of its gross profits from its equity business.
Bonds and derivatives now bring in more than five times the £180m the bourse made from stocks in the first nine months of 2024.
Concerns over the trading floor have even reached a point that significant investors in the London Stock Exchange have called for the firm to sell its exchange and rebrand as a tech firm.
Blue Whale manager Stephen Yiu said last month that LSEG’s shareholders “don’t really care” about the exchange, and its problems were “overshadowing” the success of its data business.
The London Stock Exchange’s data and analytics business now makes up around two-thirds of revenue after its deal with Microsoft.
The group’s stock price currently sits at 26 times its projected 2026 earnings, 15 per cent below other data providers on the market.
“Given the improving growth outlook, we believe the argument for LSEG’s discount to data provider peers has been further weakened,” Bathurst said.
Last year, London Stock Exchange finished a £1bn share buyback programme, and another appeal of the stock is that RBC expects further capital returns to be announced in next week’s results.
In a research note last week on the German stock exchange Deutsche Boerse, Bathurst again favoured LSEG, stating it had better prospects for capital return and “clearer re-rating potential” compared to its competitor.
Growth is also expected to remain strong, with consensus estimates expecting adjusted operating profit for the group to be up nine per cent from 2023.
“For 2025, we expect the diverse business model to deliver continued strong underlying earnings and free cash flow growth, supported by recent investments, enhanced by bolt-on acquisitions,” Bathurst explained.