IG Group shares fall 3% after heavyweight investment bank downgrades
Last updated: 06:00 04 Jun 2025 EDT, First published: 05:56 04 Jun 2025 EDT
IG Group Holdings Plc (LSE:IGG) shares were down 3% in early trading on Wednesday after UBS downgraded the stock from “Buy” to “Neutral,” warning that the investment case may be running out of steam, at least in the short term.
The Swiss bank cited a challenging growth outlook despite an expected strong set of annual results in July.
Expounding its investment thesis further, it said that while IG has benefited from heightened market volatility and increased client trading, these favourable conditions are cyclical and unlikely to continue into the next financial year.
UBS forecasts that IG will report strong results for the year ending May 2025, with profit before tax estimated to come in slightly ahead of consensus expectations.
The number of active clients is expected to remain stable, while revenue per client is likely to show growth. However, UBS warned that this creates a tough comparison for the following year, especially as market conditions normalise.
Looking ahead to the 2026 financial year and beyond, UBS highlighted that future share price performance will depend on either continued strong earnings growth or a re-rating of IG’s valuation.
For the latter to happen, the bank believes IG must successfully diversify its revenue streams and move toward more predictable, recurring income. This would require attracting long-term clients and expanding beyond its core trading services into areas such as investments and other asset classes.
UBS noted that IG’s acquisition of Freetrade has given it access to the UK retail investing market, while the recent launch of cryptocurrency trading in the UK broadens its offering.
However, building a significant presence in these areas could take time and may require further investment.
The bank also pointed to limited growth prospects for IG’s traditional retail derivatives business and added that its US platform, tastytrade, is being impacted by the weakening of the US dollar.
Despite the downgrade, UBS said IG remains financially strong and continues to return capital to shareholders.
The bank expects IG to maintain its £200 million annual share buyback programme while holding a capital surplus of over £400 million. UBS raised its price target for IG Group to 1,200p from 1,150p.
The stock fell 32p to 1,068p.
