Key Takeaways:
- Record Results: Banco Santander (SAN) posted a record Q3 profit of €3.5 billion, driven by its “ONE Transformation” strategy and solid customer growth.
- Price Projection: Despite the strong operational performance, our model suggests the stock could pull back to €9 per share by December 2027.
- Expected Returns: This target implies a negative total return (-4.9%) from current levels, suggesting the stock may be overheated after doubling in value over the last year.
- Valuation Compression: The risk lies in the valuation multiple compressing from its current highs back to historical norms.
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Banco Santander (SAN) has been an absolute rocket ship for investors over the past year.
The stock is up approximately 120% over the last 12 months, riding a wave of high interest rates and operational improvements.
In the third quarter of 2025, the Spanish banking giant delivered a record quarterly profit of €3.5 billion, making the first nine months of 2025 the best in its history.
Management is executing its “ONE Transformation” plan to simplify the business, and they have committed to distributing over €10 billion to shareholders through buybacks and dividends.
However, the stock price has reacted aggressively to this good news, currently trading near €10. With the stock priced for perfection, the question is: Is there any juice left to squeeze?
See analysts’ full growth forecasts and estimates for Banco Santander stock (It’s free) >>>
What the Model Says for SAN Stock
We evaluated Santander’s potential through 2027, balancing its strong operational momentum against its elevated valuation.
Our model paints a cautious picture. Using a forecast of 1.0% Revenue Growth (CAGR), 58.8% Operating Margins, and a slight lower P/E multiple of 8.1x the model projects the stock could drift lower to €9.50 by the end of 2027.
This implies a -4.9% total return over the next two years.
While the business is performing well, the current stock price implies expectations that may be difficult to beat in a falling interest rate environment.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for Banco Santander stock:
1. Revenue Growth: 1.0%
After a period of rapid expansion aided by high interest rates, growth is expected to normalize.
We forecast revenue growth of just 1.0% through 2027.
While the “Retail and Consumer” segments are showing strong momentum (fees up 8%), the net interest income (NII) environment is becoming “less favorable” as rates in Europe and the UK begin to decline.
The company is offsetting some of this pressure with strong growth in its “fees” business and double-digit growth in Payments, but the explosive top-line growth of 2024-2025 is unlikely to repeat.
2. Operating Margins: 58.8%
Santander’s “ONE Transformation” strategy is simplifying its operating model, allowing it to serve 178 million customers with a leaner cost structure.
The bank’s efficiency ratio has already improved to 41.3% (the best in 15 years), and costs dropped 1% in real terms despite inflationary pressures. We project operating margins to remain robust at 58.8%, reflecting management’s success in using AI and automation to strip out costs.
3. Exit P/E Multiple: 8.1x
The stock is currently trading at a forward P/E of roughly 10.7x. Historically, Santander and its European peers have traded closer to 6.8x – 8.1x earnings.
Investors are currently paying a premium for the recent “record” results.
Our model assumes the multiple could revert to a more normalized 8.1x by 2027.
If this valuation compression happens, it would wipe out the gains from earnings growth, resulting in a stagnant or falling share price.
See what analysts are forecasting for SAN stock over the next 5 years (Free with TIKR) >>>
How Much Upside Does Santander Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
