The FTSE 100‘s up 33% over the last 12 months, yet a huge number of quality stocks still look underpriced. The consequence is City brokers are forecasting stunning price gains for many of these over the coming year.
Take BT Group (LSE:BT.A) and Diageo (LSE:DGE). City analysts think these FTSE-listed stocks will rise by 50% or more over the next 12 months. So what are the chances of them taking off?
BT Group
Can BT’s share price surge 53% over the next year? That’s the view of one broker, who’s attached a 330p price target to the company. They’re expecting widescale restructuring, which includes cost-cutting and a move away from legacy services, to keep delivering strong returns.
But I’m not so sure. And neither are the vast majority of analysts rating BT shares. Those 14 currently rating the company have attached an average share price of 208.7p, down 3% from today’s levels.
I’m not surprised by their bearish position. Amid fierce competition and weak consumer spending BT’s still struggling to get sales firing. And with the Iran War raising inflationary pressures and hitting UK economic growth, its task is becoming increasingly difficult. Latest financials showed revenues down 4% in the three months to December.
Rising inflation creates another significant issue for the FTSE 100 stock. With the Bank of England now expected to hike interest rates — the market is pricing in two raises in 2026 — borrowing costs will increase. This is the same for all businesses, but the problem for BT is especially acute given the size of its debt pile.
At the end of 2025, its net debts were £20.9bn and rising.
I don’t think any of these issues are properly reflected in BT’s high valuation. The forward price-to-earnings (P/E) ratio of 14.4 times today sails above the 10-year average of 8.9.
My view is this may at least limit further price gains. If the conflict in the Middle East drags on, it could even cause a sharp drop in BT’s share price.
Diageo
Are things looking better at Diageo? After all, the company faces the same sales pressures as BT, and conditions could worsen if consumers tighten their belts still further. That’s not all — like other drinks manufacturers, volumes are under threat as people pursue healthier lifestyles and reduce alcohol intake.
Yet City analysts are confident the Guinness manufacturer’s shares can rebound from recent heavy weakness. The average share price target among 21 City analysts is £19.47, up 35% from today’s levels.
One forecaster even thinks Diageo’s share price can rise 67%, to £24.03.
While there are challenges, I’m also optimistic that Diageo can rebound as new CEO Dave Lewis’s recovery strategy begins. Steps like moving away from purely premium drinks, selling underperforming labels and stripping out costs could kickstart investor confidence and push the share price higher.
Diageo’s shares are also cheap enough to support a price rally. The forward P/E ratio of 12.6 times is miles below the 10-year average of 21-22. I’d suggest investors consider avoiding BT and take a close look at Diageo instead.
