It’s difficult to predict how a share will perform. After all, so many factors go into dictating performance. That said, I’m keen to explore where the Lloyds (LSE: LLOY) share price may head next year.
I’m a shareholder. The Black Horse Bank is a cornerstone of my portfolio. But should I continue to buy shares in 2024?
Share price history
Before we take a look at where Lloyds may head, let’s start by looking at how its performed in the past.
Right now, a share costs 45p. But this wasn’t the case five years ago. Back then, I would have paid 16% more for a share, or 54p. A few months before the pandemic, I would have shelled out over 64p.
But as was the case for many companies, the pandemic took its toll on Lloyds. At times since then, it’s been as low as 24p. If I’d bought at that price, I’d be sitting on an 84% return. Not bad.
Although it’s sunk around 2% in the last 12 months, it’s staged a recovery in the last month, rising 8%. I’m hoping it’ll carry on this momentum.
Where next?
That’s me hoping. So will it actually continue to rise?
There’s a case to be made. The firm is planning very carefully for its long-term future, which is something I like to see. This exists in the form of a £3bn strategic investment that aims to “drive revenue growth and diversification” across the business.
I also think it should experience strong growth in 2024 and beyond. Interest rates above 5% have seen the firm’s net interest margin (NIM) grow. Yet despite this, higher rates have also meant higher impairment charges.
However, as rates begin to fall closer to an optimal level of 2%-3%, which many are forecasting for the later stages of 2024, Lloyds will continue to see a benefit to its NIM, but impairment charges will become less of a concern.
What’s also attractive about the stock is its valuation. Its trailing price-to-earnings ratio is around five. That’s around half of the FTSE 100 average.
There are risks. Lloyds operates predominantly in the UK, meaning any downturn in the domestic economy will impact the firm more than other more diversified banks. The Office for Budget Responsibility recently dropped its growth outlook for 2024 and 2025 to 0.7% and 1.4% from a previous forecast of 1.8% and 2.5%. For Lloyds, this isn’t good news.
It’s also the largest mortgage lender in the UK. Volatility surrounding the housing market could cause additional issues.
However, with a dividend yield of 5.6%, this passive income will see me through should its share price experience a lull. What’s more, its dividend is covered three times by earnings.
All about the bigger picture
As I said earlier, it’s tough to be certain how Lloyds will perform in 2024. However, as a Fool, I know any volatility is part and parcel of my long-term goals. Any further Lloyds stock I buy next year won’t be for a quick gain. I’m more worried about where the share price will be in 10 years.
