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.
This post was originally published on Motley Fool
