Is Barclays worth 142p a share?

Down 41% since the beginning of the year at 105.9p today, could Barclays share price recover from the market crash of March and reach a 142p target?

  • Barclays stock price has been hit very hard by the pandemic crisis, dropping 41% to 105.9p
  • S&P Global Market Intelligence’s consensus is targeting a 25% share price rise
  • Retail revenues are expecting to rise in S2, but ‘significant risks’ remain on the banking industry

Slashed by the Coronavirus crisis, Barclays stock lost more than 41% year-to-date. Falling from 180p in January 2020 to around an 80p low at the beginning of April, Barclays share price managed to recover some of its loss this summer. It closed at 105.9p today on the FTSE 100.

S&P Global Market Intelligence’s pool of analysts has a consensus “accumulate” rating on the Barclays stock with an average target price of 142.68p, about 25% above its current price.

But is the Barclays share price really able to meet these expectations considering the coronavirus headwinds and the lack of certitudes about the economic rebound?

Optimistic momentum on Barclays’ second semester are supporting a 142p target price

The first half of 2020 has been quite a hard time for Barclays, as it has the rest of the banking industry. With the pandemic crisis the UK bank’s earnings results of S1 saw a 66% drop in profits to £695 million. However, its corporate and investment activities - 31% year-over-year at £6.9 billion - managed to repair part of the damage.

Trefis analysts believe that the British Bank can rise significantly in the upcoming months, expecting that Barclays will show some good signs of improvement, led by a progressive recovery of the economy.

According to Trefis, the easing of lockdown restrictions in most parts of the world will support consumer demand and increase significantly Barclays’ retail revenues. On the other hand, its trading revenues are expecting to go down after an exceptional 63% growth in S1, as a lot of new traders came into the market during this period of high volatility.

For the whole year of 2020, Trefis anticipates Barclays to report £21 billion in revenues – similar to their 2019 results.

If the company manages to keep its revenues on track on a recession-year, there is little doubt that Barclays share price can reach the 142p target within the next 12-months: price goal appears reasonable, as it is around 20% under the pre-crisis Barclays price share at 180p.

Could market and pandemic risks prevent Barclays share price reaching 142p?

Even if the odds are goods that Barclays will record profits recovery in Q3 and Q4, risks remains to the downside when it comes to the banking sector in stock markets.

In the first half of 2020, to fight against the pandemic consequences the company already set aside £3.7 billion as provisions for bad loans, which increased significantly the cost of its operation.

Should the economic rebound be not as strong as expected, Barclays – as its competitors – could increase its provisions to hedge loan defaults risk. And that could weight on its share price.

Robert Noble, analyst at Deutsche Bank, said to Interactive Investor that ‘significant risks remain’ on UK banks. Barclays could yet tumble as some government support measures will come to an end, or if Europe will experience a second wave of coronavirus.

Noble’s target price for Barclays, at 135p, is thereby lower than S&P Global Market’s consensus.

How to trade Barclay stocks with IG

Looking to trade Barclays and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs and spread bets in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Barclays’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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