The case of Lloyds (LSE: LLOY) is a frustrating one. Despite being a solid business with strong fundamentals, its share price hasn’t done much for years. In fact, it has been heading in the wrong direction.
In the last five years, the stock has lost 20.7% of its value. Investors would have shelled out 64.8p for a share in the Black Horse Bank back then. Today, it would cost just 51.5p.
But as investors, we shouldn’t dwell on the past. Yes, it can sometimes help us make more informed decisions. However, it’s where a stock has the potential to go in the times ahead that’s more important.
With that, where could Lloyds end this year?
My prediction
The bank has been gaining momentum in the past few months and I think it’ll continue trending upwards in the months ahead.
If its share price were to break through the 60p barrier this year, that would represent a 17.6% jump from its current price.
As a shareholder, I’d love for that to happen. However, I think that may be a tad out of reach. For now, at least.
A price of 55p would see it rise 7.8% for the remainder of the year. I think that’s more than viable. It’s already flirted with 54p this year. The 12-month analyst rating for Lloyds is 59p.
What will get it there?
It seems banks have been held back by negative market sentiment more than anything of late. But that looks like it’s changing. Many FTSE 100 banks have been gaining traction. That’s a welcome change.
But what could drive market sentiment going forward? Interest rates is one factor. They’ll dent banks’ margins, which is a negative and something I’m conscious of.
But they should also provide the wider market with a boost that will hopefully reflect on Lloyds’ share price as time goes on.
Too good to be true
That said, what I think is more important to driving its price higher, not just in 2024 but also in the years to come, is factors such as a dirt-cheap valuation.
Right now, I can grab Lloyds shares trading on just 6.9 times earnings. That’s comfortably below the Footsie average of 11. That looks too good to be true for a business of Lloyds’ stature and quality.
It’s only forecasted to get better too. That figure is expected to drop to just above six by 2026.
Cash on the side
What’s more, while I patiently wait for its share price to climb higher, I’ll happily receive the 5.4% dividend yield on offer. That beats the Footsie average of 3.9%. Off the back of its strong 2023 performance, it also announced a fresh £2bn share buyback scheme.
Let’s hold our horses
That said, let’s all take a step back. While it may feel like we’re coming out the other side of a treacherous couple of years, there are still threats.
We saw this in the US earlier this week as inflation figures came in higher than expected. That’ll impact the European interest rate outlook.
In it for the long haul
But even so, while Lloyds may be a slow burner, but I see plenty of value. Even if 2024 isn’t as kind to the stock as some predict, I’m holding onto my shares.
