Image source: Getty Images
The Lloyds Banking Group (LSE: LLOY) share price barely moved after the bank said it’s setting aside a further £800m to cover costs for the car loan mis-selling case — even thought it now takes the total provision to £1.95bn.
And rather than lowering their price targets, analysts are looking as bullish as ever. And this after Lloyds shares have already stormed ahead 50% in 2025.
Ambitious price targets
The redress from the Supreme Court case is less onerous than I’d expected. The potential number of claims might have risen. But the per-case payout looks like it’ll be less than feared. It’s justified my decision to hold, for sure.
Speaking of upbeat analysts, Jefferies raised its Lloyds share price target from 103p to 105p on 15 October — after the latest news.
That’s 27% ahead of the price at the time of writing. It would be enough to turn £5,000 invested today into £6,330. As usual, there isn’t a timescale on the estimate — but broker targets tend to be relatively short term.
Following suit?
Will other analysts lift their targets too? We’ll have to wait and see. But Morgan Stanley already has a 100p sticker on Lloyds shares, with Goldman Sachs pinning their price at 99p. Those would be enough to turn £5,000 into very close to £6,000.
Now, it’s confession time… I’m picking prices near the top of the range. But I think there’s some justification, as they’re among the most recent ones.
There’s a current average Lloyds share price target of 91p. But the estimates towards the lower end, shifting the average down, are mostly older ones.
And even the mid-point 91p could mean a £5,400 result from £5,000 invested today. An 8.5% gain in a relatively short time is a pretty decent return in my book, especially if it’s boosted by the forecast 4% dividend yield.
Building the picture
I have a few thoughts on both broker forecasts and on Lloyds shares themselves, so let’s start with the former. I’d never base an investment decision solely on forecasts.
Forecasts put Lloyds’ price-to-earnings (P/E) ratio at 12 for the current year, falling to 7.6 by 2027 based on a strong earnings growth outlook. The 4% dividend yield isn’t anything special, but if analysts are right, we could see it grow to 5.7% by 2027.
Individually, these measures look good, though they’re very uncertain. But added to my analysis of the company’s accounts and management outlook, they help me build my own picture. Every little helps.
My bottom line
I’m a bit wary of sentiment. When a stock is enjoying the kind of optimism we see at Lloyds now, it can be pushed up too high.
I also reckon the Lloyds share price is benefitting from extended high interest rates — and that still has to be a relatively short-term thing. Both could turn against the stock
Oh, and there are much more attractive dividend yields out there these days. But, bearing all these things in mind, Lloyds remains a firm hold for me… and I might even buy some more.
