The Barclays (LSE: BARC) share price has taken a substantial leap this year, soaring by an impressive 72% since January, making it one of the top performers in the FTSE 100.
Considering my financial investments for early 2025, I am leaning towards the NatWest Group as the primary choice. However, Barclays remains a strong contender and the situation might change as I get closer to making a decision.
Analysts are bullish on Barclays, with an overwhelmingly positive ‘buy’ rating for the stock, making it a compelling option for investors.
Key points to consider when evaluating Barclays include:
- Analysts have a modest share price target increase of 9% to 288.5p over the next year, with positive earnings forecasts extending beyond that time frame.
- The forecasted price-to-earnings (P/E) ratio is estimated to be 7.5 for this year, potentially dropping to 5.5 by 2026, suggesting a positive outlook based on current projections.
- Despite a dividend yield forecast of 3.3% for this year and 3.8% for 2026, which is lower compared to some competitors like NatWest Group, Barclays plans to increase shareholder returns in the future.
Barclays aims to return at least £10bn of capital to its shareholders between 2024 and 2026 through dividends and share buybacks, with a preference for buybacks.
However, there are several challenges on the horizon that could impact Barclays’ growth trajectory:
- Decreasing interest rates may affect lending margins, with potential implications for Barclays’ international banking business exposed to US rates.
- While current forecasts look promising, historical unpredictability in the banking sector raises concerns about the feasibility of achieving targets consistently over multiple years.
Barclays’ recent cost-cutting measures and strategic business focus have positioned the bank for long-term success, although uncertainty remains a factor to consider in the short term.
Ultimately, the relatively low dividend yield offered by Barclays could steer investors towards other opportunities in the banking sector, as dividends are a significant factor influencing investment decisions.
In conclusion, while Barclays may not be my top pick for early 2025 given the current landscape, market conditions are constantly evolving, and a lot could change between now and then.
