I’m searching for the best FTSE 100 shares to buy this festive season. Here’s one whose stunning price forecasts for the New Year demand serious consideration from savvy investors.
Dipping again
The strength of the UK housing market recovery has taken the market by surprise in 2024. If this continues, builders like Taylor Wimpey (LSE.TW) could spring back to life in the New Year.
Companies acoss the new-build sector have plummeted in recent months. Fears that persistent inflation will limit interest rate cuts has cast doubts on the sustainability of the market upturn.
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On top of this, warnings from mega builders Vistry and Persimmon on costs haven’t helped the builders’ share prices.
So Taylor Wimpey’s share price is now down almost 16% for the year to date. As an existing investor, I think this is an attractive dip-buying opportunity for investors to consider.
Recovery continues
The outlook for home sales remains pretty bright for next year. Rightmove — which has predicted four interest rate cuts in 2025 — thinks annual house price growth will accelerate to 2.5% for the full year.
Latest research from the property lister showed growth of 1.9% year on year in November.
Given worsening conditions in the UK economy, I think the Bank of England should maintain its appetite to keep cutting rates, even if inflationary pressures persist for longer than first thought.
Taylor Wimpey has performed especially strongly in recent months. In August, a robust first-half performance encouraged it to forecast full-year completions “towards the upper end of our previous guidance range of 9,500 to 10,000” units.
And in November, the firm affirmed its production and profits guidance for 2024 thanks to “steady signs of improvement in customer demand” from July.
Good value
City analysts are confident that this trading upturn will continue into the New Year, pushing profits sharply northwards.
Broker consensus is that the builder’s earnings will jump 23% in 2025. And this leaves it looking extremely cheap on paper.
At 121.8p, Taylor Wimpey shares trade on a price-to-earnings-to-growth (PEG) ratio of 0.5. A reminder that any sub-one reading implies that a stock is undervalued.
With the builder also commanding a 7.9% dividend yield, it offers decent value across the board. This could even lead it to rise sharply in 2025.
Strong upside in ’25?
City analysts certainly rate the housebuilder highly ahead of 2025. Of the 18 brokers with ratings on FTSE 100 company, 13 consider it a Strong Buy, with another four classifying it as a standard Buy.
One analyst rates the builder a Hold. None think that it’s a Sell.
Reflecting these numbers, the average 12-month price forecast for Taylor Wimpey shares is considerably higher than current levels, at 165.4p.
That represents a premiun of 35.8% from current levels.
A top stock
I already have a sizeable exposure to the UK housebuilding sector. Alongside Taylor Wimpey, I also hold shares in Persimmon and Barratt Redrow. Were it not for this, I’d buy more Taylor Wimpey shares for my portfolio today.
With Britain’s chronic housing shortage poised to drag on, I think these stocks could deliver excellent returns in 2025 and over the next decade.
