Lloyds share price still down over -1.5% despite Beyoncé meme gaff

Lloyds share price was down this morning -1.5% despite the banking group trying to act all cool on social media like Monzo and Revolut. It’s like when your Dad buys a pair of high-top trainers. Just nah bruv, nah – like my children would say. You’re so embarrassing. 🤢

Obviously, Lloyds Banking Group’s 493,859 LinkedIn followers and the post has now been deleted which is a shame because we really wanted to see what the 8 comments were. It’s worth keeping an eye on that number to see if it goes up or down in the next few days.

It makes you think, though, whether Lloyds is still worth investing in.

How low can the Lloyds share price go?

Lloyds’ (LON: LLOY) shares have underperformed the FTSE 100 in recent years. Today, the shares are changing hands for just 62p– a rise of 10% over the last 5 years compared to 17% from the FTSE.  At this stage, many investors are probably wondering just how low the Lloyds share price can go. So, let’s examine the outlook for the stock. Is there further downside on the cards?

Are Lloyds shares are cheap at the moment?

Today, Lloyds shares look cheap from a valuation perspective.

At present, the bank has a price-to-earnings (P/E) ratio of less than 9 and a dividend yield of over 4.7%.

These multiples suggest that Lloyds shares are undervalued right now.

However, undervalued stocks can still fall. Sometimes, cheap stocks get even cheaper.

Lloyds share price downside

Looking ahead, the strength of the UK economy is likely to be a major driver of the Lloyds share price.

As a UK-focused bank, Lloyds is essentially a proxy for the UK economy. When the economy is strong, its share price tends to rise. Similarly, when the economy is weak, its share price tends to fall.

If UK economic activity – which has been weak recently – picks up from here, Lloyds shares could potentially move higher. However, if economic conditions continue to deteriorate, we may see Lloyds shares fall below where the share price trades now.

A lot will also depend on conditions in the UK housing market as Lloyds is the UK’s largest mortgage lender.

Right now, many homeowners are struggling with their mortgage payments as a result of the recent increase in interest rates. So, Lloyds could be set to see a spike in loan defaults going forward (for  H2 2024 Lloyds posted an impairment charge of £122 million compared with £681 million a year earlier).

If Lloyds were to see a wave of defaults and its profits took a hit, there is a chance that the Lloyds share price could fall again. In this scenario, we could be looking at a LLOY lower share price.

Support at the 40p level for Lloyds shares?

If conditions in the UK economy and housing market were to stabilise from here, however, I’d be surprised if the Lloyds share price fell much below the 40p level.

• For a start, the Lloyds stock price valuation is already very low, as I mentioned earlier.
• Secondly, from a technical analysis perspective, 40p looks like a level of support on the chart for Lloyds share price lows.
• Third, a drop back to the 40p mark would most likely attract income investors. If Lloyds shares fell to 40p, we would be looking at a dividend yield of around 7% here – about twice the average FTSE 100 yield.

As for whether we will see this scenario, however, I am not super confident about Lloyds shares. Right now, there is a lot of economic uncertainty.