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There’s something going on with the Barclays (LSE: BARC) share price right now. Despite climbing over the past 12 months, the stock has fallen 10% in the past month to 442.5p as I write on Thursday morning (8 October).
Despite drifting lower ahead of the 28 October Budget, the analyst consensus estimate for the stock is 575p. So, what’s the story, and can the stock really climb 30% in the next 12 months?
The story of 2026
It hasn’t been all doom and gloom for investors, with the stock gaining 126.8% in the past five years. Management has successfully righted the ship over that time, with the valuation boost supported by:
- A strong and sustained earnings recovery as interest rates have climbed higher, boosting net interest income.
- Strategic repositioning of the bank, simplifying its operations and tilting its mix towards more stable, higher-return products and divisions.
- Increasing dividends and aggressive buybacks boosting returns to shareholders.
Those have helped propel the stock higher, with the five-year share price return outpacing the likes of Lloyds (118.3%), but 2026 has seen some of the wind get knocked out of the sails.
Why are the shares wobbling?
It’s not necessarily 2026 that’s been the problem but rather investor concerns about the 28 October Budget. The stock is down 10.5% in the past month, which is even more than rivals Lloyds (-8.7%) and HSBC (-7.5%).
That comes as a global bond sell-off pushes yields higher, reducing the value of bond holdings on the banks’ balance sheets. Higher loan impairment charges including a £228m hit linked to the collapse of Market Financial Solutions, and speculation of a proposed UK bank windfall tax in the Budget have hit valuations.
That last point is a big one. Chancellor John Healey has left the UK banks guessing on the potential tax, while even JP Morgan CEO Jamie Dimon has weighed in on the subject, saying it wouldn’t be fair.
That would just be another negative for people bringing capital to the UK.
JP Morgan CEO, Jamie Dimon
Despite this, the latest analyst consensus estimates put the stock at 575p. That implies a further 30% gain from where the shares are trading today. So, who’s right?
Lots of uncertainty
One of the biggest challenges for investors is uncertainty. I think the current share price is reflecting the big unknowns ahead of the Budget.
Analyst targets range from 500p on the low end to 680p at the top end of the range. However, I think many of these don’t currently reflect the impacts of that windfall tax, which is currently hard to quantify given the unknowns.
That creates an interesting dilemma for investors right now. On the one hand, the sharp sell-off could make the stock one to consider if the windfall tax impact is less than anticipated.
All in all, valuing bank shares with this an uncertain regulatory impact is difficult. Despite strong underlying growth in the business, I’m looking outside of the banking sector for opportunities until after the Budget.
Should you invest £5,000 in Barclays Plc right now?
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Ken Hall owns shares in Lloyds.
This story originally appeared on Motley Fool
