I have long thought that Lloyds Banking Group (LSE:LLOY) shares are expensive. To be honest, that was my belief when they were changing hands for 70p, 80p, and 90p. But on each occasion, investors have clearly disagreed with me and now (8 December), the bank’s share price is heading towards the magical 100p.
So for a bit of fun, I turned to ChatGPT to see what I’m missing. I asked: “Is it too late for me to buy Lloyds’ shares?”
What did it say?
I’ve always found the software to be incredibly polite. Indeed, it complemented me for asking a “really good question”. But it said there wasn’t a simple answer. It noted that the stock recently hit a 52-week high and described its 2025 half-year results as “solid”.
ChatGPT pointed out that the bear case centres on its share price relative to earnings being above “historical norms”, concerns that its margin might be squeezed if the Bank of England continues to cut interest rates in 2026, and an over-dependence on a UK economy that’s not really firing on all cylinders.
A more optimistic view is that the above-average dividend and share buybacks make it an attractive opportunity. If economic conditions improve then so should the bank’s earnings.
The software concluded that “I don’t think you’ve missed the chance completely” but it’s not a “slam-dunk” either. It sounds like it’s sitting on the fence to me, which isn’t very insightful.
Nothing new
Using a computer programme to decide whether to buy a stock is only a bit of fun. But it’s not a novel idea. Some investors – known as ‘chartists’ – use software to create complicated graphs of share price movements and look for trends which, they believe, can help predict the future.
Personally, I’m sceptical about the notion. Warren Buffett’s also dismissive. He once said: “I realised that technical analysis didn’t work when I turned the chart upside down and didn’t get a different answer.”
But chartism has its fans, although it can involve a lot of jargon. For example, I’ve seen one website which gives the following technical analysis for the Lloyds share price: “…the Relative Strength Index and other oscillators like the Stochastic and the Moving Average Convergence Divergence have continued rising and moved to the overbought level“.
What does this mean? It goes on: “the most likely scenario is where the stock maintains the momentum and hits the resistance level at 100p and then pulls back as investors book profits”.
So what do human ‘experts’ think, those who use more conventional techniques like analysing discounted cash flows? Well, they seem to partly agree with the computers. The consensus of analysts is that the shares are around 4% undervalued. But with an average 12-month price target of 99.5p, they don’t think the stock’s worth 100p. Despite this, most brokers are anticipating healthy growth in both earnings per share and the bank’s dividend between now and 2027.
On reflection
In my opinion, it’s better to rely on human judgement and instinct than a piece of software. And in doing this, I believe Lloyds’ shares are overvalued. When taking into account a blend of earnings, balance sheets, and dividend yields, I think there are other FTSE 100 banking stocks offering better value at the moment.
