Will the Lloyds share price break 50p in 2024?

The Lloyds share price has spent most of the year below 50p. Following Warren Buffett, Stephen Wright thinks shareholders should hope this continues in 2024.

| 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.

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.

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 Lloyds Banking Group (LSE:LLOY) has spent most of 2023 below 50p. Since the banking crisis in March, investors have been able to get two for £1 and still have change left over. 

One question for investors is whether or not the stock will break through the 50p barrier in 2024. I think, though, there are two good reasons for existing shareholders to hope it doesn’t.

Warren Buffett

According to Warren Buffett, most investors hope that the price of stocks they own will go up. And this, according to the Berkshire Hathaway CEO, is exactly the wrong attitude to have. 

As an investor, Buffett says there are two reasons for hoping the price of share he owns goes down. One is that he might want to buy more and the other is that the company might be looking to repurchase its stock.

A good example is Apple, which accounts for around half of Berkshire’s stock portfolio. During the first half of the year, the share price increased 55%, from $125 to $193.

For someone who might want to buy more shares, that’s bad. It means that a $1,000 investment would only buy five shares at the start of July, whereas it would have bought eight at the start of the year.

Apple is also a company that spends a significant amount on buybacks. The point of this is to bring down the outstanding share count, but this is much more effective when the share price is lower.

So far in 2023, the company has spent around $58bn on repurchasing stock and reduced its share count by 1.8%. If the share price hadn’t risen, though, the company could have reduced the number of shares by more.

UK banks

Exactly the same considerations apply to Lloyds. A share price below 50p represents a great chance to add to an existing investment, but even those who don’t plan on doing this stand to benefit if the stock stays down.

Like Apple, Lloyds has been buying back significant amounts of stock recently. And there’s a meaningful difference between doing that with the share price at 45p compared to 50p.

In 2022, Lloyds spent around £2bn on share buybacks. With the share price at 50p, that’s enough to bring down the share count by 4bn, but at 45p per share, the company can repurchase 4.4bn shares. 

The more the share count comes down, the more the value of each remaining share increases. This means there’s a benefit to investors if the Lloyds share price stays where it is. 

Of course, it’s better for shareholders who are actively looking to sell in the near future if the price goes up. But investors with a long-term view should hope the stock doesn’t make it above 50p.

What will 2024 bring?

Looking ahead to 2024, I think it’s likely that Lloyds will continue to repurchase its shares. That means investors have a reason to hope the share price stays below 50p for as long as possible.

Since the company buying back its stock increases the value of the remaining shares, I think the share price will get pushed above 50p eventually. But shareholders should hope this doesn’t happen in 2024.

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.

Stephen Wright has positions in Apple and Berkshire Hathaway. The Motley Fool UK has recommended Apple and 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

Growth Shares

3 wide-moat FTSE 100 stocks that offer value today

These FTSE 100 companies have some of the widest economic moats in the index. And right now, Edward Sheldon believes…

Read more »

Investing Articles

Yielding 10.6% after a 20% decline, are abrdn shares simply too cheap to ignore?

Buying a falling knife can be a risky strategy, but Andrew Mackie believes the abrdn share price decline might be…

Read more »

Investing Articles

£20,000 in savings? Here’s how I’d aim to turn that into passive income of £994 a month

A Warren Buffett investment from 1994 returns 60% each year in dividends. With enough time, could Stephen Wright achieve a…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

If I’d put £20,000 into a FTSE 100 tracker a year ago, here’s what I’d have now

The FTSE 100 is having a great year so far this year, and it seems overdue. What's the best way…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

BP share price decline is presenting a gift for value investors

As the BP share price decline accelerates following disappointing earnings, this Fool’s long-term bullish stance has not changed.

Read more »

Investing Articles

1 S&P 500 company from my ‘best stocks to buy now’ list

Zaven Boyrazian explains why this cheap-looking S&P 500 growth enterprise is on his ‘best stocks to buy now’ list for…

Read more »

Investing Articles

Down 70%, is this former FTSE 100 name set to explode like the Rolls-Royce share price?

The Rolls-Royce share price has already flown, but Roland Head wonders if this famous FTSE 250 faller could be the…

Read more »

Black father and two young daughters dancing at home
Investing Articles

2 dividend stocks I’d buy for a lifetime of passive income

The London Stock Exchange is filled with lucrative dividend stocks waiting to be discovered. Here are two long-term winners on…

Read more »