Up 32% in 12 months, where do experts think Lloyds’ share price will go next?
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I Lloyds Banking Group (LSE: LLOY) stock was one of the best performers FTSE 100 in the previous year with its profit of 32%.
The high street bank, the UK’s biggest mortgage lender, has just completed a milestone. On 14 November, Lloyds announced the completion of its £2bn share buyback programme. That should help future steps for each share.
It also means that Lloyds has seen this year’s share price buyback as an effective way to return cash to shareholders. I think Lloyds is still worth buying even after this year’s gains. But what do stock market analysts think?
The target value
First, I want to sound a warning about the price targets that traders and analysts set and their forecasts. My biggest problem is that they don’t explain how the numbers work, so I have no way to check if I agree.
But they can be a starting point, and we can then use other data from the forecasts to figure out where we think the share price might go. After all, we are our own experts, right?
There is an average target price of 65p now, with a range from 53p to 80p. That is very small compared to the rest. Company Roll-Royce Holdingsfor example, it has a target distribution of 240p to 700p.
So perhaps the City sees Lloyds as less vulnerable to share price volatility?
Correct measurement
Considering Lloyds shares are trading near the bottom of the target range, at 56p, it makes me question the current recommendations. There is little ‘buy’ consensus, but most views have the stock as a ‘hold’.
I suspect next year’s predictions may be behind that.
This year he placed Lloyds at a price-to-earnings (P/E) ratio of 8.5, which is very low in my books. And by 2026 estimates, that could drop to 6.4. Stealing?
Well, there is something called 2025 by the way, income is expected to decrease. It could raise the P/E to more than nine.
We heard a few days ago that the UK economy was weak last quarter. And Bank of England Governor Andrew Bailey has been talking about the negative economic impact of Brexit.
It’s not out yet
Those woods we’ve entered, we haven’t come out yet. I see weakness in banking stocks over the next 12 months, and Lloyds’ 2024 hike may be what we can expect for now.
But that 6.4 P/E forecast for 2026 makes me see the shares as very cheap. However, I think the revenue forecast for that year may be a little optimistic considering the economic issues.
What if I cut the 2026 forecast to 8p EPS (currently 8.6p). And I predict a fair P/E of, say, 10? That could see Lloyds’ share price reach around 80p by 2026. Or 64p if the P/E is only 8.
That’s at the high end of analysts’ target range. But no one should trust my ratings more than theirs. Do your own research folks.
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