Where might the Lloyds share price go in the next 12 months? Here’s what the experts say

The Lloyds share price slides as a rival receives an unfavourable court ruling, but does this mean a buying opportunity for long-term investors to consider?

| More on:

Image source: Getty Images

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.

The last 12 months have been terrific for the Lloyds (LSE:LLOY) share price. The British banking giant has flourished under a higher interest rate environment, enabling the share price to rise by almost 40% over the last year.

Lloyds isn’t the only bank that has benefitted from a better lending environment. Barclays and NatWest Group have also enjoyed a rally this year. But could the growth seen so far be just the tip of the iceberg? Let’s take a look at the latest analyst predictions for Lloyds.

A mixed bag of opinions

Despite the positive momentum behind Lloyds shares, it seems most institutional analysts are largely on the fence about whether the bank’s worth buying today. Of the 19 analysts tracking the business, only seven seem to think Lloyds shares are a good stock to buy right now.

OpinionAnalysts
Buy1
Outperform6
Hold11
Sell1
Strong Sell0

What about share price predictions for Lloyds shares? As of October, the most pessimistic outlook for the next 12 months places the stock price at 54p, with the most optimistic at 83p.

In terms of upside potential, shareholders could reap as much as 51% return versus today’s valuation. And better yet, the downside seems to be quite limited, given that 54p seems to be in line with the group’s current trading level.

So what should investors make of all this?

The bull and bear cases

The expansion of the bank’s net interest margin kickstarted a huge wave of profits for Lloyds. As one of Britain’s biggest lenders, even a 1% increase in profitability translated into a significant expansion of earnings. And while interest rates are now starting to fall again, the resulting rebound in the financial markets is enabling its investment division to reap even more profits for shareholders.

Needless to say, this is all rather good news. And since the financial markets are expected to continue rising as interest rates fall further, why aren’t the experts more bullish on this bank? The answer lies in regulatory uncertainty.

Lloyds has found itself at the centre of an investigation by the Financial Conduct Authority over commissions of motor financing policies. Close Brothers Group recently found itself receiving a less-than-favourable court ruling that sent its share price crashing more than 30%. And even Lloyds shares suffered a double-digit tumble as investor concerns continue to mount up.

From a valuation standpoint, the Lloyds share price looks fairly cheap. Its current price-to-earnings ratio sits at just 8.0. That’s notably below some of its leading peers and around half that of the FTSE 100‘s average. Nevertheless, this cheap-looking valuation may be justified by the uncertainty of the ongoing regulatory investigation that could see the bank being fined heavily. For now, I’m sticking to the side of caution and keeping Lloyds on my watchlist.

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.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »

Investing Articles

The latest growth forecasts suggest the Glencore share price will hit 555p!

Harvey Jones has been disappointed by the performance of the Glencore share price since he bought the commodity stock last…

Read more »

Dividend Shares

A closer look at the 11% dividend yield forecast for Phoenix Group shares

Phoenix Group shares have one of the highest dividend yields in the FTSE 100 index today. Could this be a…

Read more »

Investing Articles

If I’d put £25,000 into the FTSE 350 at the start of 2024, here’s how much I’d have today!

Many FTSE shares have rebounded this year as interest rates look set to keep heading lower and market appetite for…

Read more »

Investing Articles

Up 40%, but experts forecast the easyJet share price could soon hit 664p! Time to buy?

The easyJet share price has been flying lately and stock analysts are predicting more fun to come. But there's only…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »