This FTSE stock is primed to rally 65% according to the experts

Analysts from banks and brokers put out their view on FTSE companies, along with a 12-month target price. Even though it’s not always correct, taking into account the average target price from a multitude of experts can provide a good gauge on sentiment around a particular company. So what’s the story behind the share I’m looking at today?

Scrolling through the forecasts

I’m talking about Gamma CommunicationsÂ (LSE:GAMA). Over the past year, the stock’s down 32%, yet it’s still in the FTSE 250. As such, it’s not a small stock that we’re talking about for potentially large gains.

The share price is currently 899p. I can see 11 different contributors to the forecast, with the lowest at 1,080p and the highest at 1,820p. A notable mention goes to Barclays, with the team forecasting a price next year of 1,600p.

Based on the average target price of 1,483p, if hit, this would mean a 65% increase from the current level. Even if this average isn’t reached, even the lowest expected price is higher than where the UK stock is right now.

Taking a step back

Before I get into my view, it’s important to understand why the stock has fallen over the past year. A 32% drop isn’t something that can be brushed off!

The business is a cloud telephony provider that sells related technology and software. Unfortunately, demand among small businesses has been weaker due to economic conditions, dampening organic revenue growth.

Further, there’s a current structural shift in the industry related to the UK PSTN switch-off. This process, which involves ending the old copper phone network, has been delayed and has reduced short-term profits. This is because customers replacing old hardware with fibre solutions often generate lower profit margins for Gamma.

Even though these remain risks going forward, an update last month showed that adjusted EBITDA for the full year is expected to fall within the consensus range of Â£140m to Â£143m. Therefore, the business is still profitable and doing well, just not at the pace of growth some expect.

Well-positioned

There are plenty of reasons to think the stock could do well in the coming year. The broader shift to cloud communications continues. Gamma is well positioned to benefit from this ongoing move. It’s also seeing strong growth in the German market, and a large number of businesses there aren’t fully on cloud communications, presenting a lucrative opportunity.

Yet while I believe the stock could rally in 2026, I struggle to see the potential for a 65% surge. Where would that comes from? However, I do think the company looks like good value after the price fall, so it’s a stock to consider for investors. From there, the extent of its rebound is anybody’s guess!

The post This FTSE stock is primed to rally 65% according to the experts appeared first on The Motley Fool UK.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and Gamma Communications 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.