Where might the Lloyds share price go in the next 12 months? Here’s what the experts say

The Lloyds share price slides as a rival receives an unfavourable court ruling, but does this mean a buying opportunity for long-term investors to consider?

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The last 12 months have been terrific for the Lloyds (LSE:LLOY) share price. The British banking giant has flourished under a higher interest rate environment, enabling the share price to rise by almost 40% over the last year.

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Lloyds isn’t the only bank that has benefitted from a better lending environment. Barclays and NatWest Group have also enjoyed a rally this year. But could the growth seen so far be just the tip of the iceberg? Let’s take a look at the latest analyst predictions for Lloyds.

A mixed bag of opinions

Despite the positive momentum behind Lloyds shares, it seems most institutional analysts are largely on the fence about whether the bank’s worth buying today. Of the 19 analysts tracking the business, only seven seem to think Lloyds shares are a good stock to buy right now.

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When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Ashtead Group Plc made the list?

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OpinionAnalysts
Buy1
Outperform6
Hold11
Sell1
Strong Sell0

What about share price predictions for Lloyds shares? As of October, the most pessimistic outlook for the next 12 months places the stock price at 54p, with the most optimistic at 83p.

In terms of upside potential, shareholders could reap as much as 51% return versus today’s valuation. And better yet, the downside seems to be quite limited, given that 54p seems to be in line with the group’s current trading level.

So what should investors make of all this?

The bull and bear cases

The expansion of the bank’s net interest margin kickstarted a huge wave of profits for Lloyds. As one of Britain’s biggest lenders, even a 1% increase in profitability translated into a significant expansion of earnings. And while interest rates are now starting to fall again, the resulting rebound in the financial markets is enabling its investment division to reap even more profits for shareholders.

Needless to say, this is all rather good news. And since the financial markets are expected to continue rising as interest rates fall further, why aren’t the experts more bullish on this bank? The answer lies in regulatory uncertainty.

Lloyds has found itself at the centre of an investigation by the Financial Conduct Authority over commissions of motor financing policies. Close Brothers Group recently found itself receiving a less-than-favourable court ruling that sent its share price crashing more than 30%. And even Lloyds shares suffered a double-digit tumble as investor concerns continue to mount up.

From a valuation standpoint, the Lloyds share price looks fairly cheap. Its current price-to-earnings ratio sits at just 8.0. That’s notably below some of its leading peers and around half that of the FTSE 100‘s average. Nevertheless, this cheap-looking valuation may be justified by the uncertainty of the ongoing regulatory investigation that could see the bank being fined heavily. For now, I’m sticking to the side of caution and keeping Lloyds on my watchlist.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

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