Over the past year or so I’ve become accustomed to seeing bullish broker forecasts for the Lloyds Banking Group (LSE: LLOY) share price.
But looking at the latest January summary from the London Stock Exchange Group, I’m surprise to see the consensus downgraded to Neutral. Just three months ago we had a solid Buy consenus.
And of five analysts out of 17 who had the stock as a strong Buy three months ago, only two of them still rate Lloyds so highly. What should private investors make of this?
Mixed reaction
Firstly, I think we need to sit back a bit and take this kind of stuff in our stride. After all, contrarians are always looking for the ones the City folk get wrong, right?
Short-term uncertainty weighs on the professionals. And it’s the kind of uncertainty that long-term Foolish investors are better able to overlook. But at the same time, I’d never ignore what the City is saying about any stocks I’m interested in. It’s very much a part of my strategy to consider all opinions before I make up my own mind.
A number of recent events have changed the short-term landscape for Lloyds. Not the least of which is the share price, which has risen 48% in the past 12 months, though not close to the doubling achieved by Barclays. Maybe Lloyds was a screaming buy a year ago, but the shouting seems quieter now.
The consensus price target at the moment is still only around 65p. That’s just a few pennies above the current price, so that alone might be all that lies behind the softening stance.
Threats
Lloyds has been in the news recently for what many might see as a disturbing reason. It’s planning to close another 136 branches. That’s about 10% of the UK total, and it makes the term ‘high street bank’ seem increasingly historical.
It’s not such bad news for shareholders though, as it’s really just part of the growing shift from cash to digital transactions. If anything, it should cut costs and hopefully help maintain profit margins. It doesn’t make the stock any less attractive for me.
The ongoing car loan mis-selling investigation is more worrying. The recent intervention from Chancellor Rachel Reeves has settled my nerves a bit, however. She’s urged the Supreme Court that “any remedy should be proportionate to the loss actually suffered by the consumer and avoid conferring a windfall“.
That could help ease fears that Lloyds could be hit for as much as £1.5bn.
Why buy?
We’re looking at a forecast price-to-earnings (P/E) ratio of 10, on the low side by FTSE 100 standards. But in the current economy, I think that might be about right. There’s a forward dividend yield of 4.6%, which I rate as decent for a bank. It’s not the best though, with HSBC Holdings on a predicted 5.8%.
But considering my optimistic view of the long-term outlook for banks and mortgage lenders, I’m holding my Lloyds shares. And I could see myself topping up in the future.
The post What does the latest analysts’ take on the Lloyds share price mean for investors? appeared first on The Motley Fool UK.
But this isn’t the only opportunity that’s caught my attention this week. Here are:
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 report — 5 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
More reading
Should cheap Lloyds shares be on investors’ shopping lists in February?
£10k invested in Lloyds shares one month ago is now worth…
£5,000 invested in Lloyds shares 10 years ago is now worth…
Is the Lloyds share price recovery finally kicking off thanks to the Treasury?
Here’s the dividend forecast for Lloyds shares for 2025 and 2026!
Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc, HSBC Holdings, and 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.
