London Stock Exchange Group PLC (LSE:LSEG) is expected to significantly upgrade its growth targets and either use its growing cash on bolt-on-deals or extending its share buybacks when it hosts investor presentations later in the autumn.
This is the latest view from JPMorgan ahead of the 'capital markets day' presentations in November.
Analysts at the investment bank have placed the stock on 'price catalyst watch' on the back of three key points, chiefly that the CMS is expected to see "a material upgrade to revenue growth targets as part of the new strategic plan", thanks to the growing momentum in Data & Analytics, where the Refinitiv acquisition two years ago was built on with a Microsoft deal late last year.
Currently, JPMorgan's estimates are only modestly above the City consensus, but the analysts see "upside risk if the group quantifies the revenue contribution from the Microsoft partnership, which we think is not fully reflected in estimates yet".
Second, noting that LSEG shares are trading at around a 24% discount to other data companies, despite estimates suggesting a similar earnings growth profile, the analysts see this "valuation gap" narrowing if growth accelerates, with risks from the share overhang from Blackstone and Reuters having considerably reduced with the recent block sales.
The third point is focused on capital generation, where bolt-on deals are seen potentially growing the top line and capacity seen for larger deals, or continuing buybacks if not.
Based on changes to current estimates before the CMS, the analysts increased their share price target to 9,920p, versus the last close at 8,366p.