Shares in London Stock Exchange Group Plc (LSE:LSEG) fell more than 4% after Rothschild & Co Redburn downgraded the stock to “neutral” from a more positive stance and reduced its price target to £104 from £120.
The broker cited concerns that advances in artificial intelligence could increase pressure on parts of LSEG’s Data & Analytics business, particularly areas exposed to changing customer behaviour and evolving methods of data consumption.
Redburn Flags Diverging Business Dynamics
In its research note, Redburn described LSEG’s earnings profile as becoming “increasingly bar-belled,” arguing that some of the group’s businesses remain highly resilient while others face growing structural challenges.
According to the broker, operations such as real-time market data, index services and post-trade infrastructure continue to benefit from strong competitive positions and high barriers to entry.
However, it warned that products linked to workflow tools, terminals and segments of non-real-time data services may be more vulnerable to technological disruption.
“These concerns are not without merit,” Redburn said, adding that a shift toward “modular, API- and AI-driven data consumption may prove structurally deflationary for parts of the model.”
AI Seen as Potential Source of Pressure
The broker estimated that approximately 30% of LSEG’s earnings before interest, taxes, depreciation and amortisation could face downside risk under what it described as a realistic base-case scenario.
Redburn identified three principal concerns: AI-driven disintermediation within Data & Analytics, cyclical pressures affecting the Markets division and the potential application of a conglomerate discount to the group’s valuation.
The note suggested that as clients increasingly access information through AI-enabled tools and application programming interfaces, some traditional data aggregation and workflow products could experience pricing and demand pressures over time.
Valuation Remains Attractive but Uncertainty Persists
Despite the downgrade, Redburn acknowledged that LSEG remains capable of delivering low double-digit earnings-per-share growth, supported by mid- to high-single-digit organic revenue expansion and operating leverage.
The broker noted that the shares currently trade at around 18 times forward earnings, below the approximately 24 times average seen since the Refinitiv acquisition.
However, Redburn argued that uncertainty surrounding the long-term outlook for parts of the Data & Analytics division may limit the potential for valuation expansion.
The new £104 price target still implies approximately 15% upside from current levels, but the broker said the balance between opportunities and risks has become more evenly matched.
Focus Turns to Data & Analytics Strategy
The downgrade highlights increasing investor focus on how financial information providers adapt to rapid technological change and the growing influence of artificial intelligence across capital markets.
While LSEG retains significant strengths across its infrastructure, market data and index businesses, analysts are increasingly evaluating how AI could reshape demand for traditional financial information products and workflow solutions.
Management’s ability to navigate these changes is likely to remain a key area of attention for investors in the coming years.
More about London Stock Exchange Group
London Stock Exchange Group Plc is a global financial markets infrastructure and data provider operating across capital markets, post-trade services, indices and financial information. The company owns businesses including the London Stock Exchange, FTSE Russell and LSEG Data & Analytics, which was significantly expanded through the acquisition of Refinitiv. LSEG serves financial institutions, corporations and governments worldwide through a combination of trading, clearing, data and technology services.
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