Top banks and other research firms regularly have analysts put out their stock forecasts for companies in the FTSE 100. Even though these shouldn’t be taken as gospel, they can provide a good barometer for what the experts are thinking. So when I saw an updated forecast for the Barclays (LSE:BARC) share price, it caught my eye.
A strong view from Wall Street
Goldman Sachs analyst Chris Hallam issued the buy recommendation. He has set a target price for the coming year of 340p. For comparison, the share price is currently 277p. This means Hallam thinks there’s the potential for a 23% rally from the current price. Although I can’t find any reasons behind his decision right now, more details could come out over the next week.
The 340p target now means that of the 22 analysts with a rating on the stock, 17 recommend buying, four hold, and only one suggests selling. The average target price is 354p. The one that really stands out to me is the 410p forecast from JP Morgan.
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So, even though I need to take any subjective view on a stock with a pinch of salt, the bias is clearly in favour of Barclays shares moving higher over the next year. But the banking stock is already up 54% in the last year, so some might be concerned about the viability of such a continued move.
Reasons to be cautious
At the start of April, I wrote about why I was cautious about investing in Barclays stock. Aside from the sharp move higher that we’ve already had, my concerns remain that the US tariff news and the potential for a larger-scale trade war will be bad for the bank.
Part of this comes from lower fees from the investment banking division. Given the uncertainty in the air, management teams won’t want to get involved in mergers and acquisitions right now. Further, there are growing calls for central banks around the world to start cutting interest rates. This is mostly focused on concern that tariffs will hit economic growth. If this happens, Barclays will struggle due to experiencing a lower net interest margin.
Out of consensus
I appreciate that my views are different from the rest of the crowd. Some share price targets flag the belief that the stock is undervalued. With a price-to-earnings ratio of 7.70, I do get this. It’s below the fair value benchmark of 10 that many investors use as a line in the sand.
However, I still don’t believe that investors are appreciating what could happen if the trade war escalates from here. Even though I get why some will be using this opportunity to buy the stock, I’m going to be sitting this one out.
