UBS has reiterated its buy rating on LSEG, the London Stock Exchange Group, ahead of a third-quarter trading update due on 22 October, keeping its price target at 11,700p despite making minor upgrades to earnings forecasts.
Analysts Michael Werner, Haley Tam and Amit Jagadeesh raised their 2027-28 revenue outlook by 0.4-0.5%, citing dollar strength and improved trading activity across LSEG's Tradeweb, cash equities and foreign exchange platforms.
Higher costs partly offset those gains, leaving earnings per share estimates for 2026-28 broadly unchanged, up by 0-1%.
With shares trading at 8,386p, the 11,700p target implies upside of around 40%, and UBS says valuation multiples are near 10-year lows.
The central concern remains artificial intelligence.
Investors are worried that LSEG's core data businesses, particularly its Workflows division and the broader Data and Analytics (D&A) segment, face disruption from AI adoption, and the bank does not expect the coming results to resolve that uncertainty.
Management guided at the first-half results that client use of LSEG's model context protocol (MCP) server for AI-driven workflows would be a steady but gradual revenue contributor, which UBS says makes near-term catalysts unlikely.
A sum-of-the-parts analysis in the note produces a striking conclusion: the market is currently attributing a negative value to the D&A business, which generates the bulk of LSEG's subscription revenue.
LSEG's price-to-earnings ratio sits at a record discount to European exchange peer Euronext, while its price-earnings-to-growth (PEG) ratio of 1x is an all-time low.
UBS expects 6-7% annual revenue growth and a 15% earnings per share compound annual growth rate between 2025 and 2028, but says the stock will remain a show-me story until management can demonstrate it is converting AI adoption into revenue.
