Artificial intelligence has given investors a new set of bogeymen, and lately the London Stock Exchange Group PLC (LSE:LSEG) has been cast as one of them.
The fear is that nimble rivals, armed with clever AI tools, will eat into its pricing power in data and analytics. Citi thinks that story is overblown.
The bank’s analysts argue that LSEG’s crown jewels are its data sets, vast, proprietary and embedded in clients’ systems, which are not easily replicated by software upstarts.
In their view, the market has gone too far in marking the shares down, leaving the stock 35% lower this year and valued at the bottom of its peer group.
To test the bear case, Citi ran three scenarios. Two assumed no growth in workflows revenue and a two-point haircut to data and feeds, areas where the analysts still expect 3–4% and 6–7% growth respectively.
The third stripped out workflows altogether. Even on these harsh assumptions, they say the numbers do not justify the current gloom.
Citi has trimmed its target price by 4% to £127 as sector valuations slipped, but that still suggests 50% upside from today’s levels. The stock has become an AI scapegoat, they say, but the fundamentals are far sturdier than the narrative suggests.