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London Stock Exchange Group stock forecast: Will LSEG’s Microsoft tie-up pay dividends?

By Alejandro Arrieche

Edited by Vanessa Kintu

13:46, 15 December 2022

London Stock Exchange Group logo on the wall
The London Stock Exchange Group was created with the merger of Borsa Italiana and the London Stock Exchange. Photo: Victor Moussa / Shutterstock

Shares of the London Stock Exchange Group (LSEG) have accumulated positive results in 2022, shortly after the completion of the acquisition of Refinitiv.

London Stock Exchange Group live price chart

The company has signed a 10-year partnership with Microsoft to revamp its technological infrastructure and offer innovative products and services that rely on the firm’s Azure cloud solution.

The London Stock Exchange Group hopes the deal has a positive impact on its finances within the next decade, although it will also result in higher costs in the short term as it plans to spend at least $2.8bn during the contract’s lifetime.

In this article, we will be sharing further information about this financial services company along with London Stock Exchange Group share price predictions and commentary from analysts in regards to its prospects.

What is the London Stock Exchange Group (LSEG)?

In October 2007, Borsa Italiana and the London Stock Exchange – an institution with more than 300 years of history – merged to create what is now known as the London Stock Exchange Group (LSEG). 

The company is a well-diversified financial services firm that generates revenue from three core business activities:

  • Data and analytics: the LSEG provides access to an extensive database containing market data coming out of the exchanges it owns, offering it to sophisticated parties within the financial industry including hedge funds, investment banks, trading desks, and asset management firms.

  • Capital markets: this unit offers issuers the possibility to raise capital by offering their financial assets on the exchanges and markets it owns and operates including the Main Market and Alternative Investment Market (AIM).

  • Post Trade: this segment of the business specialises in providing sophisticated solutions to both issuers and investors such as access to over-the-counter (OTC) securities, risk management tools and advisory and services related to regulatory reporting. 

As of the third quarter of fiscal year 2022 the data and analytics segment was the most relevant for the LSE Group, generating £1.27bn ($1.57bn) in revenue. This figure accounted for nearly 65% of total revenue (£1.98bn) the firm generated during that quarter. 

David Schwimmer, CEO of the London Stock Exchange Group, has been with the company since 2018. By the end of 2021, the firm employed more than 23,000 workers to run its operations, the majority of which are based in the US and the UK.

London Stock Exchange Group vs US and UK major indices 10-year performance

Shares of the London Stock Exchange Group were listed on the Main Market in July 2011 under the ticker symbol ‘LSEG’. In the past 10 years, the LSEG share price has increased by 851.1%. During that same period, the value of the FTSE 100 index has risen by just 26.6%.

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London Stock Exchange Group stock price history

LSEG technical chart

The LSEG share price has been on an uptrend since the year started. The stock has accumulated gains of 9.1% thus far despite the overall weakness equity markets have experienced of late.

The chart above indicates that the stock has been making multiple consecutive higher lows since late February. However, the price action has failed to move above the 8,600p level.

The more times a resistance is tagged, the higher the possibility that the level will be broken, as long as the lower trend line remains intact. As of 14 December, the price is tagging this lower bound for the fourth time. If that threshold is broken, that could be considered a bearish signal in the near term.

Moving forward, the most relevant support levels to watch to draft a plausible London Stock Exchange Group stock forecast are the 7,200p and 6,700p horizontal support lines shown in the chart. The 8,400p and 8,600p levels remain the key resistances to overcome if bulls expect to take control of the price action. 

Key drivers and news to consider to draft an LSEG share price forecast

Macroeconomic conditions

The UK economy is expected to enter a recessionary cycle in 2023 as the country’s gross domestic product (GDP) is forecast to shrink by 1.3%, according to estimates from the British Chamber of Commerce

Inflation is expected to surge to 11% this year and decelerate to 5% by Q4 2023. Meanwhile, the official interest rate set by the Bank of England (BoE) is expected to increase from 3% to 5.25% by the end of this same period. 

All of these factors could have a negative impact on the performance of UK equities, including shares in the London Stock Exchange Group, which indicate a slowdown in the country’s economic activity and growth.

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State of the capital markets

Liquidity in financial markets has dried up lately as central banks have adopted restrictive monetary policies to reduce inflation. In an environment of increasingly higher interest rates, companies are typically less willing to raise additional capital as borrowing costs increase, while the value of their equity is negatively affected. 

During the first half of 2022, the number of initial public offerings (IPO) in both the Main Market and AIM dropped by 45%, according to a report from EY. A total of 26 issuers raised £595m during this period, compared to 47 issuers that raised £9.4bn during the first half of 2021. 

This situation directly affects the performance of LSEG’s capital markets unit.

War between Russia and Ukraine

The armed conflict between Russia and Ukraine remains a risk for all companies in the European region. 

The war is relevant when it comes to drafting a London Stock Exchange Group share price forecast. Companies could be severely affected if the conflict extends to other countries.

Results coming out of the Microsoft deal

The LSEG’s partnership with Microsoft could have a positive influence on the performance of the company’s data and analytics business unit. It could result in the creation of new products and solutions offered to customers. 

As part of the deal, Microsoft has agreed to purchase 4% of common shares in the LSE Group. This could be interpreted as a sign that the tech company is committed to generating positive results from the partnership. According to LSEG’s leadership, this collaboration “is expected to increase LSEG’s revenue growth meaningfully over time as the key workstreams are delivered”. 

LSEG CEO David Schwimmer said in regards to Microsoft’s investment in the company: 

“We are delighted to welcome Microsoft as a shareholder. We believe our partnership with Microsoft will transform the way our customers discover, analyse, and trade securities around the world, and create substantial value over time. We look forward to delivering on that potential.”

Meanwhile, the head of Microsoft, Satya Nadella, stated: 

“Our partnership will bring together the industry leadership of the London Stock Exchange Group with the trust and breadth of the Microsoft Cloud — spanning Azure, AI, and Teams — to build next-generation services that will empower our customers to generate business insights, automate complex and time consuming processes, and ultimately, do more with less”.

London Stock Exchange Group share price forecast: Analysts’ predictions and commentary

According to data from the LSEG, the consensus recommendation for its stock, based on the opinion of 18 analysts as of 1 November, was ‘buy’ – 14 firms rating the stock as such.

The average price target stood at 9,304p, implying a 23% upside potential within the next 12 months. 

As of 14 December, estimates from Wallet Investor, a third-party forecasting service, showed the short-term outlook for LSEG stock was bearish, based on an assessment of its technical indicators. The following are the algorithm’s baseline London Stock Exchange Group share price predictions for the next one to three years.

London Stock Exchange Group share price forecast 2023: 7,223p

London Stock Exchange Group share price forecast 2025: 6,426p 

In both cases, the mid and long-term outlook for the stock appears to be bearish. The algorithm’s forecasts imply a 4.4% and 14.9% decline in the share price within the next one and three years, respectively.

None of these opinions and forecasts should be considered recommendations to invest in LSEG stock. Investors are encouraged to perform adequate due diligence before making any investment decision. Past performance does not guarantee future results. And never invest more than you can afford to lose.

FAQs

Is London Stock Exchange Group (LSE) a good stock to buy?

The stock of the London Stock Exchange Group has outperformed the British FTSE 100 index in the past 10 years. However, past performance is no guarantee of future results. Investors must analyse the fundamentals and prospects of the business before making any investment decision.

Will London Stock Exchange Group stock go up or down?

No-one can say for sure. According to estimates from Wallet Investor, the baseline LSE share price forecast for 2023 and 2025 is bearish. However, analysts’ consensus rating for the stock was ‘buy’, as of 1 November this year based on their predictions for the stock for the next 12 months.

Note that analysts’ predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading. And never invest or trade money you cannot afford to lose.

Should I invest in London Stock Exchange Group stock?

The decision to invest in any financial asset should only be made after you have assessed the instrument’s prospects and risks along with his/her individual risk tolerance and financial goals. You should do your own research. Remember that past performance is no guarantee of future success. And never invest money you cannot afford to lose.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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