Lloyds (LLOY:LON) shares have risen significantly over the last year. Currently, they’re changing hands for 57p – about 33% above the share price 12 months ago. Could the shares go on to hit £1 in the near term? Let’s take a look at the setup.
Can Lloyds shares keep rising?
At first glance, Lloyds shares do look relatively cheap today. For 2025, City analysts expect Lloyds’ earnings per share (EPS) to come in at 6.73p. So, at the current share price of 57p, the forward-looking price-to-earnings (P/E) ratio is about 8.5 assuming the EPS forecast is accurate (it may not be). That’s well below the average FTSE 100 P/E ratio, which is roughly 12.5.
Given this low valuation, there could be potential for further share price gains in the near term. Personally, I wouldn’t be surprised to see the shares rise back up to 60p, or slightly higher, in 2025. It’s worth noting that the average analyst price target, according to Stockopedia, is 65.4p. That’s about 15% higher than the current share price.
Is a share price of £1 achievable in 2025?
As for the £1 level, however, I’m not convinced that that’s a realistic target in the short or medium term. There are several reasons why.
For a start, Lloyds shares are generally seen as a proxy for the UK economy (i.e. they tend to do well when the economy is doing well). And right now, the UK economy is struggling. In November, for example, GDP grew by just 0.1%. Meanwhile, for the three-month period to the end of November, the economy showed no growth at all.
Secondly, sentiment towards UK shares remains weak. Currently, there’s little interest in the UK market within the institutional investment community (this is linked to the weak economy). Right now, global investors see better opportunities in other areas of the world such as the US and India, where there’s more growth. For Lloyds shares to hit £1, I think we’d need to see a lot of enthusiasm for the UK market.
A third issue is the fact that interest rates in the UK will probably come down over the next 12 months (again due to the weak economy). Currently, economists expect between two and four rate cuts in 2025. This could slow Lloyds’ profit growth. When rates are higher, banks can generate a larger spread between their borrowing and lending rates (and larger profits).
Finally, there’s quite a bit of uncertainty surrounding Lloyds shares given the Financial Conduct Authority’s (FCA) investigation into motor finance mis-selling. At this stage, we don’t know what the implications of this investigation will be. But Lloyds could potentially be looking at a rather large bill (in the billions). This could have a negative impact on its profits and put pressure on its share price.
Putting this all together, I’m not expecting to see Lloyds shares at £1 any time soon. I do think there’s potential for some share price upside in 2025, but I’d be very surprised if the shares hit £1.
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Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
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