Share Prices & Company Research

Market News

29 Jun 2021 | 12:45

Barclays rates IG 'overweight', says derating 'harsh'

(Sharecast News) - IG Group's derating is "harsh", Barclays said as the bank reinstated coverage of the spread betting and derivatives platform. Shares of IG have fallen 7% since it agreed to buy tastyTrade of the US for $1bn in January while the FTSE 100 index has gained 8%, Barclays said.

Barclays said the decline reflected worries about trading conditions normalising after business soared during the pandemic and a high price paid for tastyTrade.

Barclays said revenue per client was likely to go back to pre-crisis levels in the 2022 financial year but that customers gained would help cushion the effect. Core markets will decline by 20% year on year but this is a 1% increase compared with the 2020 financial year, Barclays said.

The price paid for tastyTrade looks high at 19.5 times enterprise value to earnings but this drops to 11 times using guidance for low single-digit accretion, Barclays said. In the 2023 financial year the US market will slow down but with market share gains tastyTrade's earnings should be £84m or 2.2 times 2020, Barclays said.

Barclays set a share price target of £10.35 - £2 higher than the shares' value of £8.35 when the bank published its note. The shares rose 2.1% to 852.25p at 13:21 BST.

"We recognise cyclical concerns, but if IG can hit our forecasts, we believe the shares are very attractively valued. IG has only traded below current multiples ... during periods of material regulatory uncertainty," Barclays said.

"Regulation is an ever-present risk for IG, but the acquisition diversifies risk, in our view. IG's total addressable markets have also increased post the tastyTrade deal, and the management team has a strong track record of having an innovative and disruptive approach."



Get in touch today
Join Redmayne Bentley
Talk to us now about opening a new account or transferring your account from another provider
0113 243 6941
Get in touch today
Contact your local office
Contact your local office to find out more
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
We use cookies on this site to improve your experience and help us provide you with a better website. An explanation of the cookies we use and their purpose can be found within our Cookie Policy. Your continued use of this site means you consent to the use of cookies.