Barclays‘ (LSE: BARC) shares are roaring back after reports that the US has struck a surprise trade deal with China. But the Barclays share price bounce started well before today.
When the FTSE 100 closed on 2 April, Barclays was trading at 296.75p. Hours later, Donald Trump dropped the bombshell about his so-called ‘Liberation Day’ tariffs, and markets fell.
As always, The Motley Fool urged calm. No panic-selling or rushing for the exits. Just sit tight and scan the market for classic buying opportunities. Anyone who picked Barclays should be happy today.
By 7 April, with panic still swirling, its shares had dropped more than 18% to just 241.85p. Today, they’re trading at 315.55p, up more than 30%. That would have turned a £10k investment into around £13k.
Long-term momentum
Long-term investors should also be feeling pleased. Barclays shares are up 45% over 12 months, and 191% over five years. FTSE banks are finally showing sustained strong performance, following more than a decade of post-financial crisis volatility.
Yet Barclays still looks surprisingly affordable. Its price-to-earnings ratio is just 8.5. On a price-to-book basis, it’s only 0.6. That’s a solid discount given that a figure of one is seen as fair value.
The dividend yield isn’t enormous at 2.66% on a trailing basis, but forecasts suggest it could grow to 2.89% this year and 3.89% in 2026. That’s not all. The board has pledged £10bn in total capital returns between now and 2026, mostly in the shape of share buybacks.
Barclays also looks in strong financial shape. In Q1, it posted a return on tangible equity of 14%, well above its annual target. Profit before tax rose 19% to £2.7bn and total income rose 11% to £7.7bn. It’s also raised its full-year income forecast to more than £12.5bn, up from £12.2bn, citing strength in its UK business.
Concerns remain
No investment’s ever risk-free. The trade deal bounce might not last. Trump’s unpredictable and further tariff volatility can’t be ruled out. Markets are still waiting for concrete details on US-China talks, and there’s a risk that confidence could fade if clarity doesn’t emerge soon.
Also, if interest rates continue to fall this could eat into net interest margins, a crucial measure of banking profitability. And of course, the UK economy’s still in a mess.
Dividends, growth and buybacks
Even with those uncertainties, there’s a lot to like here. Of the 18 analysts tracking Barclays, 14 rate it a Strong Buy, three say Hold, and only one’s unimpressed, naming it a Strong Sell.
The 16 analysts offering one-year share price forecasts have a median target of 361p. If that proves right, it would mean a 14% gain from current levels. Forecasts can never be relied upon and this does confirm my suspicions that Barclays shares have to slow at some point. Nobody should expect another 30% jump any time soon. That kind of surge is rare and unpredictable.
But given Barclays’ solid performance, financial strength and amenable valuation, I think it’s a stock investors might still consider buying today.
