I was right about the Barclays share price! Here’s what I think happens next

Again in January, I purchased some Barclays (LSE:BARC) shares for my portfolio. Quick ahead a few months and I’m up shut to twenty%. With the Barclays share value now at 52-week highs above 180p, some would possibly assume it appears a bit bit overbought. Right here’s why I disagree, together with the place I feel the inventory heads subsequent.

Restructure information taken effectively

I wrote intimately about completely different explanation why I assumed the inventory was undervalued again at the beginning of the 12 months. Considered one of them was the technique refresh that was due out in February. Now that we’re in March, I can look again on the main points.

The CEO commented that he’s pushing for a “easier, higher, extra balanced financial institution”. The effectivity drive will purpose to chop £2bn price of prices. That is cut up between workers cuts, infrastructure financial savings and workplace house.

Buyers took this replace effectively, which I assumed could be the case. Regardless that it would hamper short-term monetary outcomes, it’ll drive long-term worth for the financial institution (and shareholders).

As we get extra updates on how this technique shift’s progressing, I count on the share value to proceed to rally. In fact, if a press release exhibits that prices are ballooning, or that one thing’s gone flawed, this received’t be good. However so long as the administration workforce sticks to the plan and executes it effectively, I feel it is a constructive going ahead.

It’s nonetheless undervalued

Even with the rally prior to now few months, the inventory’s nonetheless undervalued for my part. The worth-to-earnings ratio is 6.55, effectively under the benchmark determine of 10 that I exploit to evaluate a good worth. The worth-to-book ratio is 0.4, once more effectively under the place I imagine it must be in the long run.

Positive, the 33% transfer increased prior to now 12 months has diminished how a lot of a discount the banking inventory is. However after I look ahead, I don’t imagine the rally has a motive to cease based mostly on the valuation. If something, I feel the present worth signifies {that a} additional bounce’s coming over the subsequent few months.

Granted, no inventory strikes upwards in a straight line. I’m not suggesting the inventory received’t undergo some down days alongside the best way. However I feel the share value trajectory’s nonetheless firmly up.

Be careful for outcomes

This time subsequent month we get the Q1 outcomes launch. The are a possible danger. The enterprise might disappoint buyers, based mostly on UK efficiency. In spite of everything, the nation’s at present in a recession, so spending and mortgage defaults might have risen in Q1.

This might be a damaging for the financial institution, though it may very well be missed by constructive information relating to increased web curiosity revenue. Both method, it’s an occasion I’ve received pencilled in my diary.

Based mostly on the advantages of the restructure and the (nonetheless) low valuation, I feel the Barclays share value would possibly proceed to push increased.