The Lloyds share price hasn’t peaked, analysts say

Dr James Fox explores the forecast for the Lloyds share price as analysts remain bullish on this British banking behemoth despite recent struggles.

| 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.

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 (LSE:LLOY) share price has retreated in recent weeks following renewed concerns about fines related to motor finance. However, this doesn’t dampen the long-term prospects of the UK’s third-largest bank by market cap.

Analysts remains largely positive on the firm. There are currently three ‘buy’ ratings, four ‘outperform’ ratings, 10 ‘hold’ ratings, and one ‘sell’ rating.

This is broadly positive and it‘s reinforced by an average share price target of 64.9p. That’s 22.5% above the current share price and infers the company is considerably undervalued at this time.

Should you invest £1,000 in ITV right now?

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 ITV made the list?

See the 6 stocks

So, why is this? Let’s take a closer look at why most analysts believe Lloyds could be a great long-term investment.

Earnings trajectory is positive

Lloyds’s earnings forecast is promising despite a near-term dip in 2024 — which will likely reflect the impact of the aforementioned fine.

Earnings per share are expected to fall from 7.97p in 2023 to 6.69p in 2024, but a strong recovery is projected thereafter. Analysts anticipate a 10% increase to 7.39p in 2025, with further growth expected in 2026.

This positive trajectory is supported by Lloyds’s recent financial performance. The bank reported a statutory profit after tax of £3.8bn for the first nine months of 2024, with a return on tangible equity of 14%. Its strong capital position, with a CET1 ratio of 14.3%, provides a solid foundation for future growth.

Dividend prospects are particularly encouraging. Forecasts suggest a steady increase in payouts, with yields potentially reaching 6.7% by 2026. This upward trend in dividends reflects the bank’s confidence in its long-term financial health and commitment to shareholder returns.

An improving environment

The UK’s macroeconomic environment is set to improve in the coming years, potentially putting an end to a decade of underperformance, with forecasts indicating stronger growth than Europe from 2025 onwards. The OECD projects UK GDP growth of 1.2% in 2025, outpacing the eurozone.

This positive outlook could significantly benefit Lloyds, which is entirely focused on the domestic market. Further interest rate cuts could also stimulate lending and enhance profitability, while the unwinding of interest rate hedges could boost Lloyds’s earnings by up to 80%.

Moreover, falling inflation and rising real disposable income are likely to increase consumer spending and borrowing. As the largest mortgage provider in the UK, Lloyds stands to gain from a revitalised housing market.

Hold through the volatility

I’m not buying more Lloyds shares because my exposure to UK banks is already higher than I’d like — including Lloyds. However, that doesn’t mean I’m not bullish on Lloyds.

I accept that there could be volatility for a host of reasons. If this motor finance fine comes in larger than anticipated, we could see the share price react negatively. But bank shares react to a host of macroeconomic events.

As such, I see Lloyds as a stock for investors to consider buying and holding for the next decade. The dividend yield could grow to around 10% by 2034 based on current prices. And, assuming the next decade is more stable for the UK than the last — no Brexit, no Covid — the stock’s valuation could move closer in line with American peers that currently trade around 11-14 times earnings.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

James Fox has positions in Lloyds Banking Group Plc. 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »

Investing Articles

Prediction: Unilever to outperform the FTSE 100 over the next 12 months

The FTSE 100 has made a strong start to 2025, but Stephen Wright thinks a popular dividend stock could be…

Read more »

Investing Articles

I just bought this legendary S&P 500 tech stock for my ISA, 27% off its highs

This S&P 500 stock has tanked over the last month and Edward Sheldon has snapped it up for his portfolio…

Read more »