Citi has upgraded Phoenix Group Holdings PLC (LSE:PHNX) to 'buy' and raised its price target by 36% to £7.30, citing growing balance sheet flexibility, improved cash generation and a clear shift in strategic direction.
The bank now sees a total expected return of 27%.
Long regarded as a specialist in closed-book insurance, Phoenix is evolving into a broader player in retirement savings. Its growing bulk annuity franchise and focus on workplace pensions mark a meaningful pivot.
Citi sees further upside as the group begins to retain more of its own customers, benefit from cost efficiencies, and reduce its debt burden.
A well-covered 9% dividend yield adds further support to the investment case.
Free cash flow is forecast to reach a recurring yield of 14%, rising to 19% by 2027, or 24% in an upside scenario.
With the shares trading at a 35% discount to peers, Citi believes the valuation gap can begin to close as execution improves and investor confidence returns.
In early afternoon trading, the shares were up 1.7% at £6.32.
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