If we follow what the City analysts are predicting it looks like we could be in for a summer of FTSE 100 growth. They mostly still rate Rolls-Royce Holdings as a Buy — though that’s a bit rich for my blood these days.
But two others particularly catch my eye. And one of them surprises me — but I’ll leave that for last.
Defence boost
BAE Systems (LSE: BA.) has soared more than 280% over the past five years — though that’s still way behind Rolls-Royce’s 1,100%.
Yet even after a rise like that, brokers expect even more. They have an average price target on the stock of 2,322p — around 11% above where were are today.
And looking at analyst models, my Twelfth Magpie colleague Mark Hartley recently concluded they had it around 25% below fair value.
The company’s latest trading update highlighted…
- Strong operational and financial performance so far in 2026.
- Full-year guidance maintained.
- Increased defence spending across all our key markets.
- Well positioned for growth over the medium term.
The main potential threats I see concern valuation and timing. We’re looking at a forecast price-to-earnings (P/E) ratio of 25 right now. And many will see that as at least fully valued.
And the defence business has been cyclical over the long term. Is it really wise to consider investing at a time when the future will hopefully be more peaceful?
Still, the changing world order means there might actually be years of defence growth to come, I think. So I’d say BAE’s worth looking into — even if it’s not for me.
Best till last?
And then we come to RELX (LSE: REL), which seems to have the City experts all excited. A full 14 out of the 15 I can find with recommendations urge us to Buy. And even the lone party pooper is only sitting on a Hold recommendation — so hardly a gloom merchant.
The 3,618p average target is about 50% higher than the share price at the time of writing, with the stock lagging the FTSE 100 over the past year.
So why all the optimism? It looks like it’s that AI thing…
The continued evolution of artificial intelligence is enabling us to add more value to our customers, as we embed additional functionality in our products, and to develop and launch products at a faster pace, while continuing to manage cost growth below revenue growth.
CEO Erik Engstrom, FY 2025 results
April’s AGM trading update continued along the same lines: “Strong underlying revenue growth continues to be driven across segments by our deeply embedded, AI-enabled analytics and decision tools.“
Bull vs Bear
I confess I’m pulled in two directions here. I certainly can’t ignore the surge in AI technology. But I’m just not sure which pioneers will pass the test of time — the rising tide lifting all boats thing.
Against that, RELX has a forward P/E of only 19 — and that could be cheap if it’s a long-term AI winner. Oh, and the company’s raised its dividend for 15 consecutive years — albeit with a modest yield under 3%.
Should investors be considering RELX as a way to earn dividend cash from AI? I am.
Should you invest £5,000 in BAE Systems right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?
Alan Oscroft does not hold any positions in the companies mentioned.
