Shares in both Legal & General (LSE: LGEN) and National Grid (LSE: NG.) have been volatile recently. In the insurer’s case, it’s because it announced a new strategy and financial targets at its Capital Markets Event. In the electricity and gas company’s case, it’s because it announced a £7bn rights issue.
After these events, City brokers have been quick to adjust their share price targets for the two popular FTSE 100 stocks. Here’s a look at some of the latest price targets.
Legal & General
With Legal & General, brokers have generally been reducing their price targets.
Broker
Old target
New target
Deutsche Bank
300p
275p
Barclays
315p
320p
Berenberg
289p
265p
BofA Global Research
275p
268p
UBS
258p
240p
It seems City analysts weren’t that impressed with the company’s new strategy and financial targets.
For those who didn’t see these, Legal & General said at its Capital Market Event that it:
Would simplify its structure by bringing together Legal & General Investment Management (LGIM) and Legal & General Capital (LGC).
Was aiming for annualised growth of 6%-9% in core operating earnings per share between 2024 and 2027.
Is looking to grow its private assets to £85bn by 2028 from £48bn today.
Plans to increase its dividend by 5% this year, but only by 2% between 2025 and 2027 (investors didn’t like this news).
Would be launching a £200m share buyback.
I think Legal & General shares have appeal, especially from an income investing perspective. Currently, the dividend yield here is over 9%.
However, the recent price target reductions from brokers aren’t ideal. These can weigh on a company’s share price.
The 240p target from UBS is certainly interesting. This suggests that its analysts don’t really see much potential for share price gains in the medium term (the price is just over 230p as I write on 21 June). These analysts believe Legal & General could be facing high costs as it tries to grow its private assets division, so this is a risk to consider.
That said, Barclays has a price target of 320p. That’s a lot higher than today’s share price.
If this target was to come to fruition, the shares could provide big returns when dividends are factored in.
National Grid
Moving on to National Grid, brokers have been reducing their price targets here too.
Broker
Old target
New target
Goldman Sachs
1,059p
1,007p
Barclays
1,365p
1,120p
HSBC
1,103p
1,060p
Morgan Stanley
1,200p
1,150p
UBS
1,240p
1,115p
Jefferies
1,330p
1,150p
RBC
1,250p
1,125p
But this makes sense. That’s because the £7bn rights issue introduced seven new shares for every 24 that were in existence.
When a company’s share count is diluted like this, its share price usually falls to account for the new shares that have been issued.
The good news for investors here is that all of the targets are well above the current share price of 908p. The average price target is 1,104p which is roughly 22% higher than today’s share price.
If the stock was to rise to that level in the next 12 months, investors could be looking at gains of nearly 30% when the 5% dividend yield is factored in.
Of course, broker price targets shouldn’t be relied upon. Often, they’re way off the mark.
In National Grid’s case, the stock could take a hit if interest rates were to stay higher for longer. That’s because the company has a stack of debt on its balance sheet.
All things considered though, I like the look of National Grid shares today. I think they have the potential to provide solid returns in the years ahead.
The post Here are brokers’ new price targets for Legal & General and National Grid shares appeared first on The Motley Fool UK.
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More reading
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Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch
Here’s what the National Grid share price fall could mean for passive income investors
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4 reasons I’d still buy National Grid shares in a heartbeat despite the recent wobble!
Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and HSBC Holdings. HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
