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Lloyds share price has soared as I predicted: is it a buy?

By: Invezz
lloyds tsb

Lloyds (LON: LLOY) share price has done well in the past few weeks. After bottoming at 40.92p in February, the stock has rebounded to about 50p even as the FTSE 100 index has moved sideways in this period. It has outperformed other UK bank stocks like NatWest and Standard Chartered.

Lloyds Bank is doing well

My last article on Lloyds Bank was on February 15th when its stock was in a strong downward trend. At the time, I predicted that it was forming a falling wedge pattern and that it would have a bullish breakout.

This prediction was accurate as the stock surged by more than 21% after the company published strong financial results.

The most recent data shows that the company’s profit jumped to £1.2 billion in the fourth quarter, bringing the full-year figure to £5.5 billion. Its net income rose to £17.9 billion. 

The company’s performance was due to the elevated interest rates in the UK. The Bank of England (BoE) has maintained rates above 5% in a bid to fight the elevated inflation. As a result, its net interest income rose by 5% to £13.85 billion as the margin jumped to 3.11%. 

Lloyds Bank expects that the company will do well in the coming years. The management hopes that its banking net interest margin will be higher than 290 basis points. It also sees that its return on tangible equity (RoTE) will be 13%.

The stock has also done well because the UK economy is doing modestly better than expected. A report by the Office of National Statistics (ONS) revealed that the economy expanded by 0.2% in January. 

Most analysts believe that the company is relatively undervalued. Lloyds has a forward dividend yield of 7.43%, higher than that of other banks like Barclays, Unicredit, and Deutsche Bank.

The company has a trailing PE multiple of 6.63, which is lower than that of other banks. Its price-to-book ratio of 0.78 is also weaker than other firms.

Lloyds share price forecastLloyds share price

LLOY chart by TradingView

On the daily chart, we see that Lloyds stock price formed a falling wedge in February and then made a bullish breakout on February 16th. This price action is in line with my last prediction.

The stock has jumped above the important resistance point at 48.33p, its highest point on December 27th. Additionally, the 50-day and 100-day Exponential Moving Averages (EMA) have formed a bullish crossover.

The Commodity Channel Index (CCI) and the Percentage Price Oscillator (PPO) have all pointed upwards. This is a sign that the stock is having a strong momentum.

Therefore, the outlook for the stock is moderately bullish, with the next point to watch being at 51.45p, its highest swing in February 2023. More upside will be confirmed if the price moves above 51.45p. Such a move will see it rise to 55p. The alternative scenario is where the stock retreats and retests the support at 48.33p.

The post Lloyds share price has soared as I predicted: is it a buy? appeared first on Invezz

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