On Friday (2 January), the Vodafone (LSE:VOD) share price broke through the 100p-barrier for the first time since March 2023.
Just over an hour later, Lloyds Banking Group (LSE:LLOY) stock followed suit. The last time the bank’s shares were changing hands for more than £1 was just before the 2008 global financial crisis.
But could either of them maintain their recent strong rallies in 2026? Let’s see.
[fool_stock_chart ticker=”LSE:VOD LSE:LLOY” start_date=”20210103″ end_date=”” comparison_value=””]‘Expert’ opinion
If the analysts are to be believed, the answer to this question is: no. In both cases, the stocks are trading slightly above the consensus 12-month share price target set by brokers. Of course, these are just opinions, albeit ones from individuals who spend a large proportion of their time studying the finances of both companies.
However, I’ve long believed that Lloyds’ shares are over-priced. Using the price-to-earnings (P/E) ratio, it’s the most expensive of the five banking stocks on the FTSE 100. And it derives nearly all of its income from the UK. Although most economists are expecting the economy to grow this year, business and consumer confidence appears low and the state of the nation’s finances remains a cause for concern. A downturn could lead to a rise in bad loans and a reduction in new business.
But analysts are forecasting some impressive profit growth. In 2024, the bank reported earnings per share (EPS) of 6.3p. This is predicted to rise to 11.3p by 2027. That’s an impressive increase of 79%. However, these forecasts are prepared by the same analysts that reckon the bank’s shares are fairly priced.
Based on a 100p share price, the stock’s trading on 8.8 times future (2027) earnings. This is pretty much in line with the MSCI Europe Bank index. In other words, it looks as though the current share price has factored in most of the anticipated growth in earnings. For this reason, I suspect there are better opportunities elsewhere.
On the other hand…
And I believe one of those could be Vodafone.
That’s because I reckon there are some early indications that the telecoms group has turned the corner after experiencing a difficult few years.
When announcing its results for the six months ended 30 September 2025, the group reported a 7.3% increase in revenue, and a 9.2% rise in adjusted operating profit compared to a year earlier. The business in Africa is performing particularly strongly with double-digit organic service revenue growth being recorded.
However, there’s no room to be complacent. The group’s struggling in Germany – its biggest market — where a change in TV law means landlords are no longer able to bundle TV contracts with tenancies. And telecoms infrastructure can be expensive, which could lead to an increase in debt levels.
But the outlook appears positive to me. During the year ended 31 March 2025 (FY25), the group reported adjusted basic EPS of 7.87 euro cents. Analysts are expecting this to increase by 44% to 11.33 euro cents by FY28. Based on current exchange rates, this implies a forward P/E ratio of 11.1. The MSCI European Communication Services index currently (2 January) has a forward figure of just under 17.
Therefore, on balance, I reckon Vodafone’s shares are worth considering.
