IG Group keeps broker ‘buy' backing despite core and Underdog risks

Panmure Liberum and Jefferies maintained buy ratings on IG Group, with price targets of 1,500p and 1,250p, respectively. Optimism is tempered by weakness in core trading and regulatory risks at Underdog; Jefferies' note followed an Underdog seminar on 8 October.

Analysis

The key question is whether IG Group’s valuation is increasingly dependent on Underdog offsetting weaker core trading. If so, regulatory uncertainty can weigh on the multiple before it produces a measurable earnings hit: investors may discount Underdog’s growth until its permitted products, customer-acquisition economics and access to markets are clearer. Conversely, evidence that core trading stabilizes would reduce the need to underwrite that option value. The two retained Buy ratings do not resolve this tension; their differing targets underline that the valuation case is sensitive to assumptions rather than a settled catalyst.

Over the next few weeks, price action may track regulatory headlines and positioning more than reported fundamentals. Over 1–3 months, watch company disclosures on core activity and any concrete regulatory outcomes for Underdog. Over 6–18 months, the structural question is whether Underdog can scale within a durable regulatory perimeter while IG’s established business remains competitive. A restrictive ruling or deterioration in core activity could compound; clearer rules and improving core metrics would weaken the cautious thesis. The article provides no valuation, earnings sensitivity or specific regulatory decision, so conviction and downside cannot be quantified.

Key Decisions for Investors

• No high-conviction directional trade on this information alone. Treat IGG as a catalyst watch rather than buying solely on the retained Buy ratings.
• For an existing long, consider limiting exposure until the next disclosures clarify core trading trends and Underdog’s regulatory position; avoid treating analyst targets as downside protection.
• A short or relative-value position is only warranted if evidence shows both continued core weakness and a material constraint on Underdog. Reassess against comparable UK online trading firms such as CMC Markets and Plus500, without assuming their exposures are identical.
• Falsifiers for the cautious view: sustained improvement in IGG’s disclosed core activity, or regulatory clarity that preserves Underdog’s viable product and customer-acquisition model. Escalating restrictions or further core deterioration would strengthen it.