Lloyds share price surges as investors pile into cheaper UK stocks
Lloyds has seen a remarkable bounce in its share price in recent weeks, as global investors have returned to UK markets.
Lloyds share price surges as investors pile into cheaper UK stocks
Lloyds has seen a remarkable bounce in its share price in recent weeks, as global investors have returned to UK markets.
Lloyds Banking Group's stock price has risen significantly, surging 40% since mid-February and gaining 15% since the start of 2024. This outperformance relative to the FTSE 100 index, which has returned 6.7% year-to-date, makes Lloyds a major beneficiary of the rebound in UK stocks.
UK rebound driven by relative cheapness
The rebound is driven by UK stocks trading at a historically large valuation discount compared to their US counterparts. With forward price-to-earnings (P/E) ratios for UK stocks 47% lower than US stocks, bargain-hunting investors are being lured back to the beaten-down UK market.
London-listed equities have lagged in recent years due to the market's heavy weightings in sectors like banking and energy that have trailed the rapid growth of US technology stocks. Brexit-related political uncertainty has also weighed on UK stocks.
The valuation discount may reflect lack of enthusiasm for the UK's sector mix, but fund managers see the value on offer as an opportunity, especially in financials set to benefit from normalising inflation and rates.
Global investors still looking for new bargains
Mergers and acquisitions (M&A) activity and buybacks signal that corporates and private equity also recognize the value on offer in UK stocks. However, some investors remain cautious given the UK's macroeconomic challenges despite the attractively cheap valuations.
Lloyds share price and technical analysis outlook
Last week the Lloyds share price traded at 57.40 pence, a level last seen in February 2020, before short-term consolidating whilst remaining above its February-to-May uptrend line at 53.80p. While this is the case, further upside should remain in store with the 60.00p region being eyed.
The only potential technical issue for bulls may be that the May peak has not been accompanied by a higher high on the daily Relative Strength Index (RSI) which denotes negative divergence and forewarns investors of a possible short-term counter-trend move. Having said that, provided the mid-April low at 49.42p doesn’t give way, the medium-term uptrend from the February trough remains intact.
Lloyds Daily Chart
Analysts recommendations
According to LSEG Data & Analytics analysts are rating Lloyds as between a ‘buy’ and a ‘hold’ with 3 strong buy, 8 buy, 5 hold and 2 sell - with the mean of estimates suggesting a long-term price target of 59.93p pence for the share, roughly 8% above the share’s current price (as of 29 May 2024).
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