Up almost 60% in a year, the Barclays (LSE: BARC) share price has been on a strong rally. Yet, with us less than eight weeks away from year-end, some might be concerned that investors could look to sell their holdings and realise a profit. I decided to combine my own thoughts with some artificial intelligence (AI) help from ChatGPT to assess where the share price could go in the coming months.
Getting a little confused
From a current share price of 404p, ChatGPT expects it to finish the year between 420p and 430p, indicating potential for continued upward movement. When I pressed it for reasoning, it gave three main points. The first approach was to use analyst forecasts, followed by technical analysis and finally, macroeconomic impacts.
It then weighted the probability of those outcomes and out came the share price range. It made notes of the assumptions and risks to the view. For example, risks included a UK recession, a big tariff shock or banking sector stress that could move the price much lower quickly.
Even though I agree with the overall share price target, I think the reasoning used doesn’t make a lot of sense. Analyst forecasts are for the next year, not the coming few months. Technical analysis (studying charts) isn’t something I’m a massive fan of either, as this is more for traders who want to buy and sell on the same day.
My reasoning
A significant factor why I think the stock could do well is continued momentum from financial outperformance. In late October, we received the Q3 results presentation which detailed how profit before tax rose from £0.9bn this time last year to £1.0bn this quarter.
Both loans and deposit balances were higher year-on-year, showing confidence from clients. Notably, net interest income increased from £1.7bn to £2bn, demonstrating the bank’s strong performance despite lower interest rates.
The strong results should give investors enough positive sentiment to continue buying the stock through to the end of the year.
The primary risk I see is the upcoming government fiscal Budget. Barclays has a significant retail client base, as well as numerous UK corporate clients. If the Budget raises personal taxes, Barclays could see lower transaction activity as people cut back on spending. It could also impact demand for mortgage products and other popular banking products. This could hit the stock immediately, if investors digest the implications quickly.
Keeping a long-term vision
With a price-to-earnings ratio of 11.38, I don’t think the Barclays share price is overvalued even with the rally this year. Even if the stock does drop between now and the end of the year, investors would be wise to consider the bigger picture.
The bank’s in a strong position with a robust balance sheet. If anything, I’d likely look to buy the stock if it did fall, as it could just be a dip as part of a longer-term rally.
