On Tuesday, UBS upgraded Legal & General Group PLC (LON:LGEN:LN) (OTC: LGGNF) stock from Neutral to Buy, increasing the price target to GBP2.60 from GBP2.40. The firm highlighted a favorable risk-reward scenario for the company, underpinned by several key factors.
The upgrade comes as UBS identifies potential upside from management actions that Legal & General has undertaken. Additionally, the company is recognized for having the highest solvency within its subsector.
UBS also considers the broader macroeconomic expectations, suggesting a potential positive reaction in Legal & General's share price should the Bank of England opt for more aggressive interest rate cuts than currently anticipated.
Legal & General's valuation appears attractive to UBS, with a forecasted full-year 2025 all-in yield of 11.1%, compared to the sector average of 7.8%. Moreover, the company's excess yield, which is the yield above risk-free rates, stands at approximately 7%, surpassing historical average levels of around 5%.
The analyst from UBS believes that the company's strong fundamentals and the potential for favorable macroeconomic conditions could contribute to a positive performance of Legal & General's stock in the market.
This assessment is based on current projections and the firm's macro view, which is not necessarily reflected in the base case scenario but offers insight into possible market dynamics.
Legal & General Group PLC, listed on the London Stock Exchange and traded over-the-counter in the United States, is now positioned by UBS as a more compelling investment opportunity within its industry, with the revised price target reflecting this upgraded outlook.
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