Two high-profile FTSE 100 shares rated 'buy'

Delivering market-beating returns in recent months, these blue-chips are on this pro's 'buy' list. 

Predicted upsides of 30% and 17% for Prudential (LSE:PRU) and Next (LSE:NXT) shares helped to stoke up optimism among investors today after a strong start to 2019 for these popular interactive investor stocks.

The latest analysis by UBS shows that Next has the potential to reach £60, with Prudential on track to do what it had threatened for much of last year and hit the magic £20 level.

Both stocks took steps towards these respective targets today, with Next up nearly 3% to 5,240p and Prudential also 3% higher at 1,595p in the wake of Wednesday's better-than-expected full-year results.

The Pru's figures reinforced the view of UBS that its growth remains undervalued by the City, particularly the continued double-digit growth seen in Asia. The broker's analysts were also reassured by the US balance sheet and continued progress on a demerger of the UK arm.

Shares trade with a projected 2020 price/earnings (PE) multiple at 8.3x, but UBS analyst Colm Kelly says this still represents a 35% discount to the sum-of-the-parts valuation.

Source: TradingView (*) Past performance is not a guide to future performance

Like many FTSE 100 stocks, Prudential (LSE:PRU) shares took a hammering at the end of 2018 only to recover in the early part of this year. Kelly has previously argued that the market is too cautious on the execution risk and uncertainties posed by the M&G Prudential demerger.

Completion is not expected until later in the year, but Kelly thinks there's a potential catalyst for shares as Prudential ticks off the various milestones on the road towards creating a separately-listed business.

What's more, the UK arm is approaching the split from a "position of strength" after operating profits rose 13% on a like-for-like basis yesterday. Overall, group profits were 6% higher.

Full-year results from Next (LSE:NXT) are due next Thursday, although guidance from the company in January has already put analysts on standby for flat profits of £723 million in 2018/19. Central guidance for the current financial year is for a small decline to £715 million.

At this early stage, UBS analysts said it would be a surprise to see any change in Next's estimates, which are based on a 1.7% rise in full price sales. The retailer remains highly cash generative, which should enable it to return another £300 million to shareholders through its ongoing share buyback programme.

Shares traded above £60 for a brief spell last summer, only to fall back to nearer £40 on fears of a disastrous Christmas for UK retailers. Those worries were overdone but UBS still thinks that the City is undervaluing the stock and particularly the momentum in its Label business, which sells third-party ranges from brands including adidas (XETRA:ADS), Boohoo (LSE:BOO) and French Connection (LSE:FCCN).

Source: TradingView (*) Past performance is not a guide to future performance

UBS said:

"Smaller brands seem to be shifting from a department store concession model to Label. Label could very soon be a £500 million business with an EBIT margin close to the group average."

*Horizontal lines on charts represent levels of previous technical support and resistance. Trendlines are marked in red.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article