Two stocks backed for more success in 2025

The share price momentum of Barclays (LSE:BARC) and London Stock Exchange Group (LSE:LSEG) has been backed to last during 2025 after the FTSE 100-listed pair were given strong City support today.

Peel Hunt sees Barclays rising by another fifth based on the improved outlook for the company’s America operations since the election of Donald Trump as US president.

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The lender’s shares are up more than 70% so far in 2024 to 268p, but the City firm thinks that valuation multiples remain unchallenging.

Its new price target stands at 321p, having increased earnings estimates for next year by 4.9% and backed Barclays to achieve 2026 financial targets that include £30 billion of revenues.

As well as the stronger US outlook, Peel Hunt’s new forecasts take into account self-help initiatives linked to the acquisition of Tesco Bank and potential opportunities in the high-return division of private banking and wealth management.

About 40% of income and 30% of costs is US-dollar denominated, driven by investment banking and the US consumer banking arm.

Peel Hunt points out that the incoming Republicans are expected to be less hostile to mergers and takeovers, which should be positive for Barclays through higher fee income.

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Pro-growth policies and the potential easing of capital requirements should also encourage lending growth and support the US economy. A lower rate of corporation tax and stronger dollar are other potential positives for the Barclays bottom line.

Peel Hunt said a price/earnings multiple in the mid-single digits by 2026 highlights a lack of investor confidence in future profits delivery. The dividend yield is “unexciting” at 3% for the current year and is lower than peers such as Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG), but including buybacks the yield based on capital returns is attractive at more than 10% for 2025.

In the short term, Peel Hunt believes the management’s preference for buybacks over dividends is justified by the current low valuation multiples.

The upgrade for London Stock Exchange comes with its shares already at a record high of 11,570p after an improvement of more than 25% during 2024.

While the shares have outperformed in recent months, UBS reckons now is not the time to take profits. The bank has raised its target by 17% to 13,500p, which is based on its forecasts for accelerated revenues growth and 100 basis points of margin expansion over three years. 

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Despite this outlook, it says that LSEG continues to be valued by investors like a stock exchange and a significant discount to US and EU information services firms such as FactSet Research Systems Inc (NYSE:FDS) and RELX (LSE:REL).

Recent earnings have not been spectacular, but UBS notes positive signs of market share developments in Desktops and Indices. It points out that 75% of its revenues are now from recurring sources, boosted by the acquisition of Refinitiv in 2021.

Data & Analytics accounts for 69% of revenues, with the Capital Markets division about 18% and Post Trade about 13%.

While investors are still waiting for LSEG to monetise products and services with Microsoft Corp (NASDAQ:MSFT), UBS believes the partnership forged with the tech giant two years ago has been helpful in attracting and retaining talent and securing long-dated contracts.