After a 9% bounce, can the Lloyds share price keep rising?

The Lloyds share price has rebounded after recent weakness, climbing by 9% in just eight days. What might help the stock to keep this upwards momentum?

| 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.

The Lloyds Banking Group (LSE: LLOY) shares are among the most widely held by UK investors. Hundreds of thousands of Brits own stock in the Black Horse bank. Also, as the UK’s largest lender, Lloyds has around 68,500 employees, many of whom own LLOY. So the Lloyds share price is one of London’s most closely watched. And, after recent weakness, the shares are bouncing back again.

The Lloyds share price struggles to beat 50p

Over the past 12 months, the Lloyds share price has soared during a strong relief rally. In fact, the stock is up more than three-quarters (+76.1%) over one year. That’s an excellent return, ranking LLOY at #11 in the FTSE 100 index’s biggest risers since late September 2020. This powerful surge came after the shares were trading at lifetime lows last September. The stock hit its 2020 high early in the year, weeks before Covid-19 crashed markets, reaching an intra-day high of 63.84p. Alas, by 22 September 2020, it had collapsed to an intra-day low of 23.58p — down by almost two-thirds (-63.1%) from its 2020 high. Back then, I said, I see a lifetime of value in Lloyds“.

After ‘Vaccine Monday’ (7 November 2020), the Lloyds share price roared back with the wider market. It ended 2020 at 36.44p and set off on a winning streak from late January. On 1 June, it hit its 2021 intra-day peak of 50.56p, but then weakness set in. Since June, the stock has struggled to hold 50p and declined steadily to close at 42.48p on Tuesday, 21 September. But the shares have since rebounded strongly. As I write on Wednesday afternoon, they trade at 46.3p, up nearly 4p (+9.0%) in eight days.

What could lift LLOY above 50p?

Though the Lloyds share price has been a roller coaster since early 2020, a solid company still lurks beneath. Lloyds is a huge business with a £32.9bn market value. It has around 30m customers across leading brands such as Lloyds Bank, Halifax, Bank of Scotland, Birmingham Midshires, and Scottish Widows. It also has the UK’s largest mortgage book, as well as a heritage stretching back 326 years to 1695.

But what might lift the Lloyds share price to 50p and beyond — and keep it there? When I view LLOY’s fundamentals, I see evident value. The stock trades on just 7.1 times earnings and offers an earnings yield of 14.2%. These are definitely indicative of a classic value share (though Lloyds has been a value trap for years). But another decent set of quarterly results, perhaps driven by sustained earnings growth, might help the stock to be re-rated. Also, the current dividend yield is just 2.7% a year, 1.1 percentage points below the FTSE 100’s forecast yield of 3.8% for 2021. But this cash dividend was curtailed by the banking regulator in 2020 and restored at a reduced level in 2021. Hence, news of a rising dividend also could inject fresh life into the stock.

Lloyds’ next major financial announcement is on 28 October 2021, when the bank releases its Q3 interim management statement. Thus, a good set of results might lift the stock a month from now. I don’t own LLOY at present, but I’d happily buy the shares at current levels. However, my biggest fear would be any economic setbacks caused by new coronavirus variants leading to more lockdowns. If the UK economy goes into reverse, or consumer spending stalls, then the Lloyds share price might well follow suit!

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 has no position in any of the shares mentioned. 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

Should I sell my FTSE All-Share index fund and buy a S&P 500 tracker instead?

Harvey Jones is wondering whether now is a good time to invest more money in the S&P 500, after a…

Read more »

Investing Articles

Should I buy dirt-cheap BT shares after the recent pullback?

BT shares were on the up but now they're sliding again after the board trimmed full-year guidance. Now Harvey Jones…

Read more »

Investing Articles

Up 28%, can the easyJet share price keep rising?

The easyJet share price has gained altitude over one year but plunged over five. Is now an attractive time for…

Read more »

British Isles on nautical map
Investing Articles

Should I buy more BAE Systems shares at 1,350p?

BAE Systems shares have had a fantastic run since early 2022, yet still don't appear overvalued. Is it now time…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

7% yield and a cheap valuation! Is this one of the best shares to buy this month?

Christopher Ruane has been looking for cheap shares to buy. This one has a 7% dividend yield, so is it…

Read more »

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

Should I buy National Grid shares for the big dividend before it’s too late?

This year's price weakness has left National Grid shares on what looks like a tempting valuation. I hope it doesn't…

Read more »

Investing Articles

There are now 5,000 ISA millionaires! See the surprising UK dividend shares they’re buying

The number of ISA millionaires is growing all the time and guess what? They're really into blue-chip dividend shares listed…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Down 38% in weeks! Time to snap up NIO stock?

NIO stock's more than doubled in value over the past five years but has been on a wild ride lately.…

Read more »