A Lloyds Banking Group (LSE: LLOY) share price of 80p would mean a rise of more than 10%. But what would it say about the valuation?
Well, it would push the forecast price-to-earnings (P/E) ratio for 2025 up to 12. That’s not much below the long-term FTSE 100 average, and it might not leave much safety room for the current economic outlook. And that, in case anybody hadn’t noticed, is not the best it’s ever been.
It could drop the forecast dividend yield down to 4% too. But the dividend is what’s kept us Lloyds shareholders going through these troubled years. And the prospect of a low yield could count against the chances of reaching 80p.
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But this is all with only a short-term view, and broker forecasts for the next few years paint a considerably brighter picture.
Earnings and dividend growth
City analysts think Lloyds can grow its earnings per share (EPS) by 70% between the 2024 full year and 2027.
Now, that’s still more than two years ahead, and that can be a long time in the investment world. There’s potentially plenty of time for a stock market crash in there. But at the same time, who says we won’t fit in lower inflation and interest rates plus a return to economic growth? It has to happen some day, surely?
Anyway, earnings growth like that could drop the P/E as low as 6.7 by 2027. And if we see that, I reckon we could easily pass an 80p share price along the way. It would only lower the 2027 P/E to around 7.5. So by then, who knows, Lloyds shares might have already smashed through 100p.
Oh, the forecasters see the dividend growing more than 45% over the same period too.
Price target
There’s one thing the City experts aren’t doing right now though. They’re not forecasting an 80p Lloyds share price. Well, at least they’re not all doing so, with a consensus of just 74p. That’s only about 2.5% ahead of the current share price at the time of writing. And it’s a bit off-putting for those of us hoping for better.
To make things worse, the most pessimistic estimate sees the price plunging as low as 53p. That would be a 36% fall!
But there’s only one broker who thinks we should sell, outnumbered by seven of the 18 I can find who think we should buy the stock. And one of those reckons we could see 90p soon, never mind 80p.
Even with that wide range of visions, I see value in examining all the opinions we can find before we make our decisions. And use them to help us become better investors day by day.
What will I do?
I do think Lloyds could reach 80p if July’s half-time report says the right things. But the uncertainty means I won’t put any more money on it. No, I think I’ll stick with the majority of the forecasters and hold.
