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Legal & General (LSE:LGEN) shares have fallen sharply after a strong start to 2026. Like many others FTSE 100 stocks, fell as conflict in the Middle East rattled investors’ nerves. But City analysts think it is time for the financial giant to rise again.
The average share price for the next year is 268.9p. That represents a 5.8% increase from current levels. With predicted dividends thrown in – Legal & General shares offer a dividend yield of 8.6% – suggesting investors could still enjoy strong double-digit returns.
In monetary terms, a £20,000 investment in an FTSE 100 company today could turn into £22,880 this time next year. However, the trader’s speculation on the prices of stocks and shares often misses the mark. So what are the chances of Legal & General delivering this kind of return?
What could go wrong?
Legal & General is one of Europe’s largest financial services companies. With leading positions in sectors such as asset management, life insurance and retirement solutions, it is well positioned to capitalize on changing demographics and emerging consumer trends.
In other words, the demand for its financial services can increase significantly as people age and financial planning grows in importance. Rising government debt levels in its Western markets mean people are looking to rely on future State pensions by taking action on their own.
The problem is that the company’s products are still selective in nature. In contrast Avivafor example, operating in a protective general insurance market, the demand for Legal & General services can decrease significantly during a downturn. The effects of the protracted conflict in the Middle East on economic growth could be significant for the FTSE company.
It doesn’t end there. As inflationary pressures increase as oil prices rise, interest rates may remain higher than the market expects. This could mean a series of setbacks for businesses like Legal & General, from slowing the housing sector to weakening the stock market recovery.
Is it worth the look?
Given these risks, there is a chance that Legal & General shares may not deliver the returns expected by City analysts. I fully expect earnings to meet forecasts given the company’s excellent cash flow and strong Solvency II ratio (217% as of June). But I think its share price may not meet expectations.
That said, it doesn’t mean that stock pickers should stay away from the company. I hold its shares in my portfolio. As a long-term investor, I’m happy to have near-term turbulence if the potential rewards down the line are worthwhile enough.
In this regard, I think Legal & General stocks will continue to do well given their huge structural potential. But it doesn’t end there. I am also encouraged by its expansion into high-growth regions, the strengthening of its asset management business, and its growing role in the pension risk transfer (PRT) sector.
With stock price gains and dividends combined, Legal & General’s has delivered an average annual return of 9.9% over 15 years. That’s on the high end of the 8% to 10% returns that stock markets typically return over time. I expect it to remain one of the strongest performers of the FTSE 100.
