- Data revenues, cash flow momentum and cyclical upside support case for rerating, analysts say
Shares in London Stock Exchange Group PLC (LSE:LSEG) rose 1.6% in late morning trading on Tuesday after Deutsche Bank upgraded the stock to 'buy', flagging a compelling combination of steady recurring revenue, improving profitability and relative valuation upside compared with global exchange peers.
The change comes with a new 12-month price target of 12,600p, up from 11,500p, and follows a period of underperformance. LSEG shares have lagged the broader European market structure sector by more than 20% year-to-date.
Deutsche highlighted the data and markets giant's defensiveness, with a revenue mix that is largely recurring and benefits from pricing power, particularly within its data and analytics division.
That segment has been improving steadily, helped by product enhancements and increasing demand for high-quality financial data.
At the same time, transaction-linked revenues (which tend to fluctuate more with market conditions) are supported by structural growth drivers such as increasing institutional participation and ongoing digitisation.
These cyclical revenues are also enjoying a near-term boost from heightened market volatility, which Deutsche believes adds another leg to the growth story.
The bank said it sees revenue growth of more than 7% as sustainable over the medium term. Meanwhile, operating leverage is beginning to show through, with EBITDA margins and free cash flow improving for the first time in several years.
It forecasts further gains in 2025 and 2026, providing a cushion in weaker markets and opening the door to potential strategic opportunities.
On valuation, Deutsche sees room for a rerating. LSEG is trading at around 25 times estimated 2026 earnings per share and 14 times enterprise value to EBITDA - levels that the bank says look attractive given the company’s growth outlook and the quality of its earnings base.
This compares favourably with global peers, many of which carry higher multiples despite slower expected growth.
The German investment bank also sees the potential for total shareholder returns of up to 50 per cent over the next three years, supported by organic growth, operating efficiency, and further monetisation of its data assets.
The upgrade is the latest sign of renewed confidence in LSEG following a multi-year transformation, including the integration of Refinitiv, which has reshaped the group’s earnings profile and reduced reliance on transactional revenues.
While execution risks remain (particularly around technology investment and product development) Deutsche believes the building blocks for long-term outperformance are now in place.
The stock was up 175p at 11,250p.