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Aviva (LSE:AV) inventory’s up 45% during the last 12 months. It has vastly outperformed the broader FTSE 100, just lately hitting its highest stage in over a decade. Which may all be previously, however buyers are actually 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 the moment have a view on the inventory, the common goal worth for the following 12 months is 689p. For reference, the share worth at the moment sits at 668p. Inside that bucket, there’s quite a lot of views.
The crew at RBC Capital are high 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 development and returns on capital, reflecting a shift in direction of a better proportion of ‘capital-light’ enterprise“.
Alternatively, 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 perhaps easing. Though comparatively few count on the inventory to fall from right here, the broad expectation is for it to consolidate and tread water round present ranges, with some minor features.
My opinion
From my perspective, I’m leaning towards the inventory gaining worth within the coming 12 months. 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 in the beginning of July. Nonetheless, as the corporate turns into built-in over the following few months, I believe it may present an extra enhance to the group total. Let’s not neglect that Direct Line has 3.7m motor coverage prospects and 4.9m non-motor purchasers. 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 buyers. 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 folks would need to personal the inventory only for the dividends.
One threat is a messy integration with Direct Line. Cultural challenges, the excessive price of mergers, and different elements may make the deal a headache for administration. That is one thing buyers will need 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 likewise the benchmark determine of 10 that I take advantage of when taking a look at a good worth.
After I weigh all the things up, I do agree with the consensus view that the Aviva share worth may rise modestly over the approaching 12 months. However after I take a look at different alternatives within the inventory market, I believe buyers may think about extra juicy choices for earnings and development elsewhere.
