On Monday, JPMorgan adjusted its stance on Legal & General Group PLC (LGEN:LN) (OTC: LGGNF), reducing the price target to GBP2.85 from the previous GBP3.30. Despite the decrease, the firm maintains an Overweight rating on the stock.
The revision follows the company's June 2024 Capital Markets Day (CMD), after which the analyst noted a significant reduction in estimates. The analyst expressed disappointment with the sell-off in shares post-CMD but reiterated a positive outlook on the stock's prospects. The new strategy outlined by Legal & General was highlighted as a beneficial change, simplifying operations and believed to be a strong move by the company.
The analysts from JPMorgan anticipates that Legal & General will surpass its newly set earnings per share (EPS) growth targets. This expectation comes despite the need for some patience from investors as the strategy unfolds.
Legal & General's commitment to a £200 million buyback program was also mentioned as a point of confidence. The analyst suggests that this initiative, along with an anticipated capital return yield of 10.5%-11% in 2025, provides a buffer against downside valuation risk for the stock.
InvestingPro Insights
In light of JPMorgan's revised stance on Legal & General Group PLC, several metrics and tips from InvestingPro provide additional context for investors considering the stock. Legal & General's commitment to returning value to shareholders is underscored by its track record of raising dividends for 33 consecutive years, a testament to its financial resilience and management's confidence in the company's stability. This aligns with JPMorgan's positive outlook and the anticipated capital return yield mentioned.
InvestingPro Tips reveal that Legal & General is expected to see net income growth this year, offering potential upside to earnings projections and possibly supporting the company's strategic initiatives. Moreover, the company's valuation implies a poor free cash flow yield, which may be a concern for some investors looking at the company's cash generation abilities.
From a data perspective, Legal & General's market capitalization stands at approximately $17.31 billion, with a trailing P/E ratio of 11.49, suggesting that the stock is trading at a multiple that reflects its earnings power. Additionally, the dividend yield is notably high at 8.8%, which is particularly attractive to income-focused investors. This is supported by a dividend growth rate of 8.71% over the last twelve months as of Q1 2023.
Investors interested in a deeper dive into Legal & General can find additional insights on InvestingPro, which lists 9 more InvestingPro Tips that could provide further guidance on the stock's potential. For those looking to make the most of these insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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