Barclays Capital gave a lift to London Stock Exchange Group PLC (LON:LSE) shares on Wednesday, upping its target price by 6% to 4,645p from 4,365p on hopes for stronger margin growth from the bourses operator.
In early afternoon trading, the FTSE 100-listed firm’s shares were trading at 4,095p, up 1.5% on Tuesday’s close.
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In a note to clients, BarCap’s analysts noted that LSE management has reiterated their full-year 2019 EBITDA margin target of 55% following recent results.
The analysts pointed out that, in their opinion, the consensus EBITDA estimate – supplied by the company - at 52% appears “overly cautious”.
They highlighted that LSE’s transatlantic exchange peers already operate with margins in the mid-50%’s and higher, and structural revenue drivers for the UK firm’s LCH/FTSE Russell operations appear favourable.
The BarCap analysts forecast LSE delivering a 54% EBITDA margin in 2019, rising to 56% in 2020, equivalent to a 55% run-rate by end 2019.
They added: “If management were able to deliver 55% margins for the whole of 2019 this could result in a consensus earnings upgrade of c11%.”
The analysts concluded: “With a forecast EPS CAGR 2017-20 of 18%, reflecting attractive divisional mix, we reiterate our Overweight rating on LSE, and raise our target price.”