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Aviva (LSE:AV) inventory’s up 45% over the past yr. It has vastly outperformed the broader FTSE 100, lately hitting its highest degree in over a decade. That may all be previously, however traders at the moment are targeted on the place the Aviva share worth can go from right here. Right here’s what the specialists suppose.
Forecast costs
Of the 16 analysts that at present have a view on the inventory, the common goal worth for the following yr is 689p. For reference, the share worth at present sits at 668p. Inside that bucket, there’s quite a lot of views.
The crew at RBC Capital are prime of the tree with a goal of 800p. By way of reasoning, it stated: “With the acquisition of Direct Line full, Aviva is positioned for enhanced earnings per share progress and returns on capital, reflecting a shift in direction of a better proportion of ‘capital-light’ enterprise“.
Then again, analysts at Jefferies forecast 560p.
What’s attention-grabbing to notice is the bunching of expectations across the present share worth. This means that banks and brokers share a view that the robust rally in Aviva shares is likely to be easing. Though comparatively few anticipate the inventory to fall from right here, the broad expectation is for it to consolidate and tread water round present ranges, with some minor positive aspects.
My opinion
From my perspective, I’m leaning towards the inventory gaining worth within the coming yr. H1 2025 working revenue jumped 22%, due to an increase in insurance coverage premium pricing.
This didn’t embody the outcomes from Direct Line, because the acquisition was solely accomplished originally of July. Nevertheless, as the corporate turns into built-in over the following few months, I believe it may present an extra increase to the group general. Let’s not neglect that Direct Line has 3.7m motor coverage prospects and 4.9m non-motor shoppers. So the potential for driving Aviva ahead is excessive primarily based on these numbers alone.
The inventory may additionally profit from continued purchases from earnings traders. With a dividend yield of 5.34%, it’s simply forward of the FTSE 100 common yield of three.11%. With the regular working mannequin and dividend historical past, I get why individuals would wish to personal the inventory only for the dividends.
One danger is a messy integration with Direct Line. Cultural challenges, the excessive value of mergers, and different elements may make the deal a headache for administration. That is one thing traders will wish to be careful for. Additional, the inventory has a price-to-earnings ratio of 28.57. That is nicely above each the FTSE 100 common and in addition the benchmark determine of 10 that I take advantage of when a good worth.
After I weigh every thing up, I do agree with the consensus view that the Aviva share worth may rise modestly over the approaching yr. However after I have a look at different alternatives within the inventory market, I believe traders may contemplate extra juicy choices for earnings and progress elsewhere.
