The Motley Fool

Barclays share price: is now the time to buy this FTSE 100 share?

Image source: Getty Images

The Barclays (LSE: BARC) share price has roared back to life since the 2020 stock market crash. In fact, the FTSE 100 share has now erased all of the losses it endured following the Covid-19 outbreak. It recently struck its most expensive since December 2019, above 180p per share, in fact.

Investor appetite for the bank first spiked when news of successful coronavirus vaccine testing broke last autumn. The triumphant rollout of these pandemic battlers in Britain have allowed the Barclays share price to keep soaring too.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Yet despite its stratospheric rise I think the Barclays share price still looks really cheap on paper. City analysts think the bank’s annual earnings will soar 85% in 2021. This leaves the FTSE 100 bank trading on a price-to-earnings growth (PEG) ratio of 0.2. Investing theory suggests any reading below 1 indicates a UK share might be undervalued.

Betting on the Barclays share price

There are several reasons why the Barclays share price could continue to ascend too. These include:

#1: Reassuring UK economic data. Banks are, of course, ultra-cyclical shares and so their fortunes are tied directly to broader economic conditions. It’s no surprise then that the Barclays share price rise has come at the same time as some key metrics, like PMI and unemployment data, in its core UK market have impressed. The good news could keep coming too as vaccine rollouts continue with great haste.

#2: Solid trading at the investment bank. Income at Barclays’ Corporate and Investment Bank rocketed 22% in 2020, thanks to extreme market volatility. It’s quite possible that trading here will remain buoyant for some time yet. Certainly as the Covid-19 crisis worsens in some parts of the world and other issues such as rising inflation and trade tensions rattle investor nerves.

3: Strong US economic growth. Unlike its FTSE 100 peers Lloyds and NatWest, Barclays has significant international exposure which could prove a key plank for long-term earnings growth. The bank has a hefty footprint in the world’s largest economy, the US. And it looks like GDP growth here will outstrip those of other advanced economies in 2021, helped by the recent $1.9trn stimulus plan.

However…

That said, there’s a couple of key reasons why I think the Barclays share price could crash again. Again, the fortunes of the banks are highly geared to the performance of the broader economy. And the outlook in the UK is packed with peril.

As the experts at Hargreaves Lansdown note: “Provisions for bad debt increased dramatically earlier in the year… and we’ll only know for sure if they are sufficient when government support is withdrawn at the end of the crisis.”

Revenues could also struggle if the economic bounce proves fleeting and the Covid-19 situation worsens.

The probability of low interest rates persisting long into the future threatens the Barclays share price too. Rock-bottom rates have smashed the difference which the FTSE 100 banks lend at, and provide to savers, over the past decade. And the Bank of England continues to publicly flirt with sending rates negative too, a scenario that would have additional ramifications on bank profits.

All things considered I’d much rather buy other cheap UK shares today.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, and Lloyds Banking Group. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.