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Lloyds Banking Group (LSE: LLOY) and Rolls-Royce Holdings (LSE:RR.) are probably the two most popular UK stocks right now. It’s easy to see why – both have generated strong gains recently. Can these stocks keep rising? Let’s take a look at City analysts’ share price forecasts for Lloyds and Rolls-Royce to see what the experts think.
Lloyds may keep climbing
Starting with Lloyds, the average price target is 90.7p. That’s approximately 14% above the current share price.
I think that target is probably achievable over the next 12-18 months or so. Looking at the earnings per share (EPS) forecast for 2026 (9.55p), the bank’s price-to-earnings (P/E) ratio is only 8.3.
That’s quite a low earnings multiple. So, there’s probably scope for some multiple expansion there.
It’s worth noting that Lloyds’ recent results, for the first half of 2025, were solid, with profits coming in ahead of expectations. On the back of this performance, the company hiked its dividend by 15% (the yield is about 4.5% today).
Looking ahead, however, UK economic conditions will be important. If we see a deterioration, I’d expect the share price to go into reverse as Lloyds – the largest UK lender – is generally seen as a proxy for the British economy.
There are some other risks too. Last week, the Institute for Public Policy Research (IPPR) suggested that the UK should tax British banks on their reserves held at the Bank of England.
This may not happen. But it does add some uncertainty to the investment case.
Is the bank stock worth considering today? Potentially.
In my view, however, there are better stocks to look at today. Taking a five-year view, I think there are other stocks that will provide higher returns.
Is Rolls-Royce about to run out of power?
Turning to Rolls-Royce, the average price target here is currently 1,091p. That’s less than 1% higher than the current share price, meaning that right now, analysts don’t see a lot of potential for gains.
What’s going on here? I think there are two issues at play.
One is that the stock has had an incredible run over the last few years. Back in 2022 it was under 70p yet today it’s over £10.
Typically, that kind of share price performance can’t be sustained. In other words, there may be a pullback, or a period or consolidation, before it goes higher.
The other issue is that the valuation now looks very high. Today, Rolls-Royce has a market cap of £90bn, making it one of the largest companies in the FTSE 100 index.
Meanwhile, the forward-looking P/E ratio (using next year’s earnings forecast) is 34. That’s a high valuation, and the company probably needs some time to grow into that multiple.
Is this stock worth snapping up today? That’s hard to say.
I do think this company is going places given its exposure to nuclear power. But as I said, the valuation is now high.
Given the exponential rise in the share price over the last three, I think waiting for a pullback is probably a smart move to consider. Buying at a lower price and valuation would most likely lead to more margin of safety if the company’s top-line growth and profit margin expansion suddenly slows down due to some kind of operational setback.
This story originally appeared on Motley Fool
