Prediction: 2 FTSE 100 shares forecast to outperform Rolls-Royce
Rolls-Royce shares have absolutely crushed the FTSE 100 over the past five years. They’ve rocketed 1,165% versus around an 80% return for the blue-chip index (including dividends).
Yet, the current broker share target of 1,222p suggests a further 16% may be on the cards in the next 12 months. So the stock may still be worth researching further, despite a tendency for analysts to either underestimate or overestimate individual stock prices.
Here, though, I want to look at a pair of FTSE 100 shares that currently have far higher price targets.
easyJet
First up is easyJet (LSE:EZJ). The stock’s 6% decline over five years compares very unfavourably with International Consolidated Airlines (IAG), whose shares have nearly tripled since 2020!
Still, budget travel is proving resilient. In Q3, easyJet’s pre-tax profit rose by £50m to £286m, while airline passenger numbers crept up 2%. It ended June with a £803m net cash position.
It can be notoriously difficult to value airline stocks due to the inherent cyclicality of the industry. So I tend to avoid them, especially when strikes, weather events, and wars can quickly impact earnings.
But as International Consolidated Airlines proves, catching them at the right time can be very lucrative. So it’s worth noting that the price target for easyJet is 32% higher than today’s 498p.
London Stock Exchange Group
The second stock forecast to outperform Rolls-Royce is London Stock Exchange Group (LSE:LSEG). Despite the name, the Group derives the bulk of its revenue nowadays from financial data and analytics.
The stock has done incredibly well long term — a total return of about 300% over 10 years — but has underperformed more recently. It’s now flat over five years and down 18% year to date.
This despite the Group signing a partnership with Microsoft in late 2022 to develop powerful generative AI tools for customers. It now has over 20 live use cases and another 100 AI tools under development, including its first agentic AI tools for its flagship Workspace platform.Â
In H1, all four divisions did well: Data & Analytics (+5.1%), FTSE Russell (+7.6%), Risk Intelligence (+12.2%), and Markets (+10.7%).
Unfortunately though, AI also appears to be one reason for the stock’s weakness. That’s because generative AI is evolving so quickly that some investors worry emerging rivals like Claude for Financial Services could be a threat to LSEGâs Data & Analytics business.
These upstarts are developing more and more capabilities, offered at a far cheaper price. So this is a possible risk.
However, CEO David Schwimmer isnât worried. On the H1 conference call, he said: âThe future is AI integrated into a desktop, not AI replacing a desktop.â
We donât know how this will play out. But if the companyâs moat — built around proprietary datasets like FTSE Russell indices and Refinitiv market data — proves durable, the stock could be very undervalued today. Itâs trading at just 20 times next yearâs forecast earnings.Â
For a global data company that generates high recurring revenues, thatâs very cheap. And it is exploiting this cheapness by spending £1bn buying back shares in the current H2 period. Meanwhile, the dividend, while only yielding 1.5%, has been growing by double digits.
The average price target for the stock among analysts is 12,595p. That’s 35.6% higher than the current share price, making this one to consider, in my opinion.
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Ben McPoland has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Microsoft and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
