After rising 11% in March, where will the Barclays share price go in April and beyond?

Is a new bull run for UK bank stocks finally under way, after a good month? And is the Barclays share price set for a strong second half?

| More on:
Man putting his card into an ATM machine while his son sits in a stroller beside him.

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 Barclays (LSE: BARC) share price climbed 11% in March, in a good month for FTSE 100 banks. Both Lloyds Banking Group and NatWest Group shares enjoyed similar gains.

We’ve seen another 3% added since then, up to the close on 9 April. And Barclays is even in positive territory over the past five years now.

But what does April and beyond hold? I think we could be in for a few exciting months for bank stocks.

Interest rates

There’s one clear big thing hanging over the banks right now, and that’s Bank of England interest rates.

And with the next decision set to take place in March, I reckon a lot of investors are already anticipating news of a cut.

In fact, a few pundits have predicted one before the first half of the year is out, which is more optimistic than we saw just a couple of months ago.

But even with inflation and interest rates as they are today, I still think Barclays shares are cheap. And I think the same about Lloyds and NatWest.

Valuation

Forecasts put the Barclays price-to-earnings (P/E) ratio as low as 6.4 for the current year. And if earnings predictions come good, that could drop to only about 4.3 by 2026.

Does that sound crazily cheap? Well, add a forecast 4.4% dividend yield to the mix, rising to 5.5% in 2026. And that just reinforces the silliness, in my view.

But, silliness can last a long time on the stock market. Or rather, perhaps I should say fundamental undervaluation due to stubborn sentiment… not silliness!

FTSE 100 shares just look perpetually undervalued to me, when we compare the Footsie to other global indexes like the S&P 500.

Frustration

We’ve even had Shell CEO Wael Sawan expressing frustration on that score.

Puzzled by what he sees as an irrational undervaluation for his own company, he’s even talked of the possibility of moving the firm’s listing from the UK.

Speaking to Bloomberg, he said that while the price is low he will “keep buying back those shares, and buying back those shares at a discount.

While sentiment is like this, I suspect Barclays shares could stay in the doldrums for the rest of the year. And maybe beyond. It might take a seriously brighter economic outlook to shift the UK investor mood.

I don’t care

But you know what? I don’t care. I can understand company CEOs being frustrated at low stock valuations. That can lead to takeover attempts, for one thing.

But I buy stocks for the dividends. And that means I’m happy for share prices to stay low.

It means I can bag some bigger dividend yields, and keep getting more for my money.

Keep buying

The government’s big share in NatWest is probably holding back bank stocks too. It’s expected to sell it off before too long, and that could also keep prices down.

So I think I expect a volatile six months for bank stocks like Barclays. But as I plan to buy this year, I’ll hope to get in on any dips.

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.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc 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

Grey cat peeking out from inside a cardboard box in a house
Investing Articles

Recently released: May’s small-cap stock recommendation [PREMIUM PICKS]

We believe the UK small-cap market offers a myriad of opportunities across a wide range of different businesses and industries.

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’m listening to Warren Buffett and buying bargain shares!

Our writer has been taking lessons from the investing career of Warren Buffett. Here's how he's using it to try…

Read more »

Close-up of British bank notes
Investing Articles

Here’s how I’d spend £6,900 on income shares to try and earn £500 per year

Christopher Ruane outlines some of the investment principles he'd apply when trying to earn £500 of dividends annually by spending…

Read more »

Newspaper and direction sign with investment options
Investing Articles

My 3 picks for the best UK shares to buy in June

Mark David Hartley is bullish about the UK stock market right now. He reckons these are the three best shares…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

23% per annum: is this FTSE 250 stock too good to turn down?

FTSE 250 constituent Games Workshop has posted an impressive return over the last five years. This Fool takes a closer…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Up 60% in a month, could this UK share keep soaring?

After this UK share surged by almost three-fifths in a matter of weeks, this writer has been re-examining the investment…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m up 25%! The Nvidia share price and other giants power this UK investment trust

I drip-fed some money into this not-so-buoyant UK investment trust and now the Nvidia share price is helping to drive…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

2 explosive stocks I’d buy today for a life-changing passive income in 10 years

For many of us, passive income is the end goal. However, unless we have a big pot of cash, we're…

Read more »