Barclays lifts Societe Generale stock rating, sees >50% upside

On Monday, Barclays (LON:BARC) analyst Amit Goel upgraded Societe Generale (OTC:SCGLY) SA shares from Equalweight to Overweight and raised the price target to EUR41.00 from EUR30.00. The upgrade reflects the potential for significant valuation improvement if the bank achieves its 2026 target of a 9-10% return on tangible equity (ROTE). The bank, currently valued at $25.54 billion, has already seen 2 analysts revise their earnings expectations upward for the upcoming period, according to InvestingPro data.

Societe Generale's stock performance has been notably strong since the release of its third-quarter 2024 results on October 31, with an increase of over 27%, outperforming several of its peers. According to Goel, this uptrend is attributed to the recent management changes and the bank's improved earnings and capital trajectory as demonstrated in the last quarter.

Despite the recent gains, Goel believes that it is not too late to invest in Societe Generale shares. The bank is projected to have one of the best earnings per share (EPS) growth trajectories into 2026, yet it remains one of the most undervalued among European banks. Trading at a P/E ratio of 8.52 and a price-to-book ratio of just 0.36, the stock appears attractively valued. InvestingPro analysis suggests the stock is currently trading below its Fair Value, with 8 additional exclusive insights available to subscribers.

Barclays' analysis suggests that if Societe Generale can meet its 2026 ROTE target, the valuation could indicate more than a 50% potential upside for the stock. This is based on an assumed fair price-to-tangible book value (P/TBV) ratio of 0.6-0.8x, with a cost of equity (CoE) of 12-14% on the targeted ROTE.

Investors have witnessed Societe Generale's shares outperforming the broader Stoxx Europe 600 Banks Index (SX7E), which rose by 11% in comparison to Societe Generale's 27% since the previous quarter's results. This performance differential highlights the bank's strong relative market position following its recent strategic and financial updates. The stock has posted an impressive 20.3% return over the past six months and is currently trading near its 52-week high of $6.42, though InvestingPro technical indicators suggest the stock may be entering overbought territory.

"In other recent news, Societe Generale has seen noteworthy developments. Morgan Stanley (NYSE:MS) upgraded the bank's stock rating from Equal-weight to Overweight, also raising the price target to €36.00 from the previous €29.00. This upgrade was influenced by the bank's third-quarter performance, which exceeded expectations, particularly with a Net Interest Income (NII) 2% higher than Morgan Stanley's estimate. Moreover, Morgan Stanley's projections for Societe Generale's pre-provision operating profit in French Retail for 2025-26 are about 6% higher than consensus.

On the other hand, Societe Generale experienced a reduction in its NII guidance for French retail operations, causing a decline in its shares. Citi, in response to these challenges and an unclear recovery path, downgraded Societe Generale's stock outlook from Buy to Neutral, adjusting the price target to €26.00. These recent developments have led to significant changes for Societe Generale, reflecting the dynamic nature of the financial landscape."

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