Here’s why I think the Lloyds share price could hit a 5-year high in 2024

It’s up 13.5% so far in 2024, and reaching new highs. But where might the Lloyds Bank share price go in the second half of 2024?

| More on:
Young black colleagues high-fiving each other at work

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) share price set a four-year high in May, at 57.4p.

For a new five-year high, it would have to eclipse the 73.7p of late 2019, just before the 2020 stock market crash.

That would mean a 36% rise. Already up 13.5% so far in 2024, that could be a bit of a stretch. But I think there’s a decent chance of it happening, and I want to explain why.

Second wind

Lloyds shares have gone off the boil a bit since reaching that 2024 high. They seem to scrape around the 55p level, but just can’t stay above it.

Still, that can happen when a stock is enjoying a bit of a recovery. We can reach a point where investors take a bit of their profit off the table, and the share price can pause a little.

We saw it with Rolls-Royce Holdings earlier in the year after its huge 2023 climb was followed by a bit of weakness. But it’s started back up again.

So can Lloyds emulate Rolls-Royce and get the bulls running again? I’d say it very much has valuation in its favour.

Super cheap

Lloyds shares are on a trailing price-to-earnings (P/E) ratio of only 6.4 based on 2023 earnings, and that’s well under half the FTSE 100‘s long-term average.

It looks like profits will fall this year, after a weak first quarter. But forecasts show earnings rising strongly again from 2025 onwards.

They’d put the P/E at about 7.3 for 2025, dropping as low as 6.4 again in 2024.

As an aside, the Rolls-Royce forward P/E stands at 32. It’s perhaps unfair to compare an aero engineer with a bank. But they’re both big favourites with UK private investors. And the same sentiment might just be there.

Share price rise

A new five-year high would push the forward 2025 Lloyds P/E to only 9.9. I’d still rate that as cheap. And the 2026 multiple would only reach 8.7.

We’re looking at a forecast dividend yield of 5.5% this year, up to 7% by 2026. So I really do think the valuation momentum is there. It just might need a bit of a nudge to get it moving.

And might that nudge come with an interest rate cut?

Most of the smart money would probably be on a cut by the autumn.

Margins vs property

That should slice into the banks’ lending margins. But Lloyds is the UK’s biggest mortgage lender so any easing of pressure on the housing market could be a big boost. And I reckon I see plenty of pent-up demand.

This is all speculative, and Lloyds does face some uphill struggles.

It’s had to make a provision of £450m related to motor finance troubles, and we don’t know where that will end. Stubborn interest rates could push the Lloyds share price own again too. And it might even go sub-50p again.

But that new five-year high by the end of 2024? I see a good chance of it.

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 Lloyds Banking Group Plc and Rolls-Royce 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

Investing Articles

Down 23%! Should I buy more CrowdStrike shares for my Stocks and Shares ISA?

Sometimes bad news can be good news for long-term investors. But is that the case for CrowdStrike in relation to…

Read more »

Investing Articles

2 UK shares near 52-week lows I’m considering snapping up

These UK shares are loitering near, or at, 52-week lows. Are these prime opportunities for our writer to boost her…

Read more »

Investing Articles

Unilever: a passive income stock with potential for decades of dividend growth

Stephen Wright thinks Unilever can keep reducing its share count for years to come. And this should help make it…

Read more »

Middle-aged black male working at home desk
Investing Articles

Worried about retirement? I’d buy high-yield dividend shares to build wealth

The number of pensioners enduring poverty in the UK looks set to rise. Investing in dividend shares could help Britons…

Read more »

Investing For Beginners

2 boring but beautiful FTSE 100 stocks to add to my ISA

Jon Smith runs over a couple of FTSE 100 stocks that he really likes the look of, even though they…

Read more »

Investing Articles

Here’s how I could supercharge my wealth by snapping up the best dividend stocks!

This Fool explains how dividend stocks play a crucial part of her aspirations to build wealth, and details one pick…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Revenue up 10% and accelerated growth potential for this overlooked FTSE 250 company

Today's first-quarter update from this good-value FTSE 250 company keeps me keen on the stock as recovery and growth continues.

Read more »

Investing Articles

Here’s why I’m so bullish about the BT share price now

The BT share price shot up after FY results, and a couple of months on it's still up there. Might…

Read more »