The Lloyds share price is up 96% since October. Would I buy today?

The Lloyd share price has leapt 29% in 2021, but has fallen back since peaking on 1 June. But I have high hopes of the shares climbing higher in 2021/22!

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

So far, 2021 has been a good year for Lloyds Banking Group (LSE: LLOY) shareholders. Lloyds shares ended 2020 at 36.44p. As I write, this FTSE 100 stock trades around 46.97p. That’s a gain of 10.53p, for a year-to-date rise of almost three-tenths (28.9%). However, the Lloyds share price has been very volatile over the past 12 months, so where might it go next?

The Lloyds share price zig-zags

The Lloyds share price has seen pretty steep and sharp moves over 2020/21. Nine months ago, on 22 September 2020, the shares slumped to a 52-week intra-day low of 23.58p. This followed news that the UK would enter another lockdown, this time over winter. Obviously, these restrictions were bad news for the UK’s largest consumer lender and its customers. But then came ‘Vaccine Monday’ (9 November 2020), with good news of several effective vaccines against Covid-19.

After this welcome shot in the arm, the Lloyds share price took off like a rocket. By the end of 2020, it was 12.86p higher — more than half (+54.5%) above its 2020 low. However, by 29 January 2021, it slipped to close at 33p.

To me, this looked like a bargain price to buy into a Big Five bank. This proved to be so, as the shares soared to hit an intra-day high of 50.56p on 1 June. That’s a gain of 17.56p and an uplift of more than a third (+34.7%) in four months. However, as worries about inflation recently unnerved markets, LLOY has fallen back to below 47p today.

What next for LLOY?

Today, the Lloyds share price stands 7.6% below its 52-week high set three weeks ago. At this level, I still see value in this £33bn bank. After all, the group should benefit from the UK economy fully opening up a month from now. Also, in spite of Covid-19, the UK economy is growing, which is good news for cyclical companies. Furthermore, Lloyds’ balance sheet is strengthening, plus its shares trade at a deep discount to their underlying net asset value (NAV).

In addition, after suspending its dividend in 2020, Lloyds has reinstated it, albeit at a much lower level. So far, the only cash dividend paid to shareholders was 0.57p a share on 25 May. Of course, the growth of this dividend will be a key driver of the future Lloyds share price (the faster, the better). But I suspect it won’t be plain sailing from here for LLOY and its long-suffering shareholders. That’s because share prices don’t rise in straight lines, just as trees don’t grow straight to the sky.

The world walks a tightrope

For me, a multi-year economic boom would be great news for the Lloyds share price. But this widely anticipated event may not materialise quite as planned. Already, we’ve seen multiple variants of Covid-19, with some deadlier and more transmissible than the original virus. If new coronavirus infections outweigh global vaccination efforts, then the world could be plunged into a third wave and further lockdowns. Obviously, this would be grim news for us all.

I don’t own this FTSE 100 share at present. However, on balance, I’d be a buyer with the Lloyds share price below 47p. Indeed, with a following wind, I expect it to hit 60p in 2021/22, as do several of my colleagues. Hence, I’d willingly buy LLOY today for rising dividend income and future capital gains.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliffdarcy does not own shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Here’s the best-performing FTSE 100 stock of the last 10 years

Private equity firm 3i has outperformed the rest of the FTSE 100 over the last 10 years. And its big…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

Here’s why Warren Buffett is selling shares (and why I’m not)

Warren Buffett cited tax considerations as his reason for selling shares in Apple. But this isn’t something most UK investors…

Read more »

Investing Articles

What on earth is going on with the AstraZeneca share price?

The AstraZeneca share price has fallen 30% from its peak in August. Dr James Fox explains what’s going on with…

Read more »

Investing Articles

2 high-yield FTSE 100 shares I’d consider buying for passive income…and one I’d avoid

Some FTSE 100 stocks have eye-popping dividend yields. But will the passive income actually be dished out? Paul Summers takes…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

These 2 former stock market darlings are trying my patience! Time to sell?

Harvey Jones thought he was getting a bargain when he snapped up these too much-loved FTSE 100 dividend growth stocks.…

Read more »

Investing Articles

Here’s how I’d use £3,000 to target a second income that grows each year

Our writer explains the approach he'd take to trying to build a second income that gets bigger over time, by…

Read more »

Elevated view over city of London skyline
Investing Articles

Is it time to buy this incredible FTSE dividend share?

Christopher Ruane examines one FTSE 100 share with a phenomenal dividend history. Does a steep share price fall this year…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

This FTSE 100 share has just crashed another 20%. Its P/E is now just 9.9 so should I buy?

Harvey Jones was tempted to buy this FTSE 100 share after it crashed in October. Now it's crashed again, it…

Read more »