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Investing.com -- JPMorgan has reaffirmed its Overweight rating on S&P Global (NYSE:SPGI), describing the firm as “a critical Information Services (NASDAQ:III) provider” with leading franchises across financial, commodity, and automotive markets.
The $575 price target implies 10% upside potential and reflects confidence in its ability to drive high-single-digit organic revenue growth, supported by strong pricing power and cross-segment synergies, the bank said in a recent report.
The company’s diversified business spans five segments, with Ratings, Market Intelligence, Indices, Commodity Insights, and Mobility collectively contributing to both scale and recurring revenue visibility.
“S&P operates the world’s largest credit rating agency, owns the S&P 500 index, and offers deep data and essential solutions to each market it serves,” analysts led by Andrew Steinerman.
S&P’s 2022 acquisition of IHS Markit has been instrumental in expanding its value proposition. The analysts believe the merger has allowed the combined entity to “grow faster together than they would have apart.”
They also highlight the company’s “impressive fundamentals”, noting that its high-margin Ratings and Indices segments, strong subscription base, and scale-driven efficiencies support above-average margins and free cash flow (FCF) even within an already high-performing peer group.
S&P’s Market Intelligence (MI) segment, which had faced two years of headwinds, is recovering too. The note states that “MI’s bookings and retention performance have clearly improved,” setting the stage for a stronger 2025.
Meanwhile, in Ratings, JPM forecasts a modest +1% organic revenue growth in 2025, with strength in investment-grade and structured finance offsetting continued softness in leveraged finance issuance.
S&P plans to spin off its Mobility business by late 2026, leaving a more focused information services firm. The unit, anchored by Carfax and RL Polk, generates over 80% of revenue from subscriptions and is “critical to the new and used vehicle industry.”
Still, some risks remain. The company’s exposure to financial market activity creates volatility in revenues. Market Intelligence’s past inconsistency, particularly in financial desktop and data feeds, also presents challenges.
Moreover, JPMorgan points out S&P’s large size post-merger may limit agility relative to more nimble competitors.
At 30x next twelve months (NTM) earnings per share (EPS), S&P trades below the sector median of 32x.
Analysts observe that the current valuation “reflects S&P’s attractive combination of organic revenue growth, adjusted EBITDA margins, and FCF conversion.”