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I think the Lloyds (LSE: LLOY) share price could hit 136.8p by the end of 2027.
That valuation would mean a further 18.3% gain from the current 114.7 share price as I write on Friday 31 July. I’m sure shareholders would be happy given the 47.4% gain already achieved in the last year.
But what’s behind my thesis and will I be buying into the banking stock in 2026?
Crunching the numbers
The company’s half-year results release on Thursday (30 July) caught my eye.
A 30% increase in the interim dividend to 1.58p per share and a 26.3% increase in earnings per share (EPS) to 4.8p were highlights. Also, management’s guidance reflected confidence in the medium-term growth story through to 2030.
Analyst consensus estimates from 17 July are showing forward EPS of 12p per share. Given management’s history of conservative guidance, I think there could potentially be even more than that.
At today’s valuation, the stock has a forward price-to-earnings (P/E) ratio of 11.4 times. That’s not cheap, but Lloyds is a reliable dividend payer, I think it’s worth a closer a look.
Here’s how I’ve calculated my price target for 2027:
- Current price: 114.7p
- FY2026 consensus EPS: 10.1p
- Implied forward P/E: 11.4 times
- FY2027 consensus EPS: 12p
- Projected 2027 price (same 11.4 times multiple applied): 136.8p
- Implied increase: 19.3
The forward P/E multiple remaining constant is the key here.
If investors are willing to back the company as an industry leader, we could see Lloyds shares climb higher in the next 12 to 18 months.
What I like about Lloyds
Thursday’s half-year results have strengthened the investment case for me. Profit growth beat expectations, costs remained controlled, lending expanded across several products, and management announced that 30% higher interim dividend alongside a £1bn share buyback.
The company’s broader income mix and potentially conservative 2030 targets could also support further earnings and shareholder returns, providing further potential.
Strong capital generation should support investment and shareholder returns, while the broader income mix offers further growth potential.
Matt Britzman, Senior Equity Analyst, Hargreaves Lansdown
Risks
The valuation is less attractive right now than its been in the past, so management will need to really deliver on its targets.
Then there’s the ever-present risks — loan impairments, intense mortgage competition, and a weaker UK economy — which could all put pressure on profits. The motor finance scandal remains unresolved, albeit with no further provisions for the moment.
I think Lloyds is one of the better banking stocks on the market. So, is now the time to consider buying?
My verdict
In my view, the stock is one to consider for those that are willing to take a favourable view on the UK economy. It’s dominant in the banking sector and has some real potential if management can deliver on its strategy.
I am just weighing up which stocks to sell in my portfolio to make room for Lloyds, but I’ll be a buyer at the 105p mark if we see the share price dip in coming months. In the meantime, there are other income stocks that have caught my eye…
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Ken Hall does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
