The Aviva (LSE: AV.) share price hasn’t had a bad 2024, so far, up 7% year-to-date. That might not be brilliant. But if it did the same every year, on top of a dividend yield currently forecast at 7.3%, I’d be laughing. And as things stand, broker forecasts for 2025 do look pretty decent.
But where do the City experts think Aviva shares are likely to go in the next 12 months and beyond?
Beware forecasts
Firstly, we should treat broker price targets with a lot of scepticism. They often look like they’re no more than guesswork. And I’d never make a Buy or Sell decision based on what some big City analyst might have to say.
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But I still think we can benefit from looking at them. I like to check out the range of price forecasts, and work out what they might need from a company’s underlying performance if they’re likely to be achieved.
Insurance shares can be tricky to value. But let’s see what the brokers think will happen to Aviva’s earnings and stock valuation.
Refocus coming good
Aviva famously reinvented itself under CEO Amanda Blanc, after being seen by many as a bit bloated and lacking focus.
It’s a fair bit slimmer and more streamlined today. And it looks like that’s already paying off. This year so far has seen business up across the board, with first-half operating profit rising 14% to £875m.
And the forecasts? They show earnings rising for the next three years, which would drop the price-to-earnings (P/E) ratio to around nine by 2026.
Given that the UK economy shrank in October for the second month in a row, and the inflation outlook remains stubborn, I actually think that might be a fair valuation for Aviva right now. It can be a cyclical business, facing a good deal of uncertainty.
Broker targets
The analysts though are pretty upbeat. At the time of writing, Aviva shares are priced at 467p. And even the lowest target price in the brokers’ spread stands at 490p.
With most stocks I look at, at least one analyst is at least a bit bearish on the price.
At the top of the range we see a 590p target, which would need a 26% price rise to meet. The timescale for these estimates isn’t specified, but they’re usually relatively short term.
It suggests the City sees a strong year ahead for the Aviva share price.
What it means
As I say, these targets on their own don’t mean much. But what they do give us is some possible valuations to work with. The current range suggests we could see Aviva with a P/E of somewhere between 9.4 and 11.3, based on 2026 earnings forecasts.
I’m bullish on Aviva, but that upper range looks a bit high to me in the current economic climate. And I could see a volatile share price in 2025.
Still, for me, it’s about the dividend. And I like that 7.3% yield coupled with rising forecasts.
