Shares of London Stock Exchange Group Plc fell over 4% after Rothschild & Co Redburn downgraded the stock to "neutral" and reduced its price target to £104 from £120 in a note dated Thursday.
Redburn characterised LSEG’s profit mix as "increasingly bar-belled," identifying a split between divisions that appear more resilient and areas it sees as more exposed. The broker said that real-time data, indices and post-trade infrastructure "remain structurally protected," while workflows such as terminals and large parts of non-real-time data are "more exposed to interface disruption and data commoditisation."
In its analysis, Redburn estimated that about 30% of group earnings before interest, taxes, depreciation and amortization is susceptible to downside pressure under what it called a "realistic base case." The hit, it said, would be concentrated in workflow and aggregation-driven revenue streams.
"These concerns are not without merit," Redburn wrote, adding that a shift toward "modular, API- and AI-driven data consumption may prove structurally deflationary for parts of the model."
The broker outlined three specific sources of risk: artificial intelligence-driven disintermediation in the Data & Analytics division, the cyclicality and volatility inherent in the Markets business, and the potential impact of a conglomerate discount on valuation.
Redburn noted LSEG currently trades at 18 times next-12-month earnings, which it described as a 26% discount to the company's post-Refinitiv acquisition average of 24 times. The firm said its own estimates sit marginally below consensus.
Despite the caution, Redburn still sees scope for earnings growth. The bank said LSEG remains positioned to compound earnings per share in the low double digits, supported by mid- to high-single-digit organic growth and operating leverage, though it qualified that view by saying it reflects "a mix of high-quality and structurally contested earnings streams."
The revised £104 price target implies roughly 15% potential upside from current levels, a balance Redburn described as leaving the "risk-reward balanced" because any execution upside could be offset by uncertainty in the Data & Analytics business. That structural uncertainty, the broker added, reduces "the scope for multiple expansion," a conclusion that underpinned its decision to downgrade the stock.
Summary: Rothschild & Co Redburn's downgrade and lower price target followed concerns that AI-driven and API-based changes to data consumption could erode parts of LSEG's workflow and aggregation revenues, with around 30% of group EBITDA considered vulnerable in a realistic downside scenario. While Redburn still forecasts low double-digit EPS compounding supported by organic growth and operating leverage, the mix of protected and contested earnings led it to mark down valuation prospects and change its recommendation.