Will the Barclays share price continue its ascent?
Barclays, along with other UK lenders, saw its share price get a boost after the Conservative Party secured a historic victory in the election last week. But analysts at Jefferies think the stock will make further gains.
Barclays shares soared more than 14% in the wake of the UK general election which saw the Conservative’s secure a history victory last week.
The lender saw its share price close at 192p on Monday, driven by reduced uncertainty over Brexit and British banks dodging Labour leader Jeremy Corbyn’s proposals for the sector which included the introduction of state-backed lending banks and a restriction on branch closures.
On Tuesday, Barclays share price slipped slightly, down 2.5% to trade at 187p as of 15:40 GMT.
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Jefferies hike Barclays price target
Analysts at Jefferies were quick to upgrade their target price for Barclays this week, with the investment bank hiking it from 209p to 244p a share.
Based on Barclays trading at 187p, analysts at Jefferies believe the stock has a potential upside of 30.4%.
Jefferies optimism about Barclays share price is based on expectations that the lender can deliver a 9.5% return on tangible equity by 2021, as well as a 9p dividend in 2019 and share buybacks of £2.5 billion in 2020 and 2021.
‘Following capital clarity at Q3 (the bank now receives consistent treatment on op risk so that it's 13.4% CET1 is now comparable with the likes of LLOY and RBS) and £1.4bn PPI charge, we believe it is now realistic to model buybacks relative to a 13.5% CET1 threshold,’ Jefferies told ShareCast.
‘Return improvement and capital repatriation are the most visible they have been in 10 years. Risk/reward is asymmetric with 78% upside in a bull case v 33% downside,’ the analysts added.
‘Our 244p price target is derived using a Gordon Growth model and we reduce our [cost of equity] estimate to 11% from 12%.’
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