Barclays Stock Trailed S&P 500 By 23% In 2023, What Happens Next?

+8.25%
Upside
10.59
Market
11.46
Trefis
BCS: Barclays logo
BCS
Barclays

Barclays’ stock (NYSE: BCS) has gained 1% YTD, as compared to the 2% drop in the S&P500 over the same period. Further, it is currently trading at $8 per share, which is 9% below its fair value of just under $9 – Trefis’ estimate for Barclays’ valuation.

Amid the current financial backdrop, BCS stock has seen little change, moving slightly from levels of $8 in early January 2021 to around $8 now, vs. an increase of about 25% for the S&P 500 over this roughly 3-year period. Overall, the performance of BCS stock with respect to the index has been lackluster. Returns for the stock were 30% in 2021, -25% in 2022, 1% in 2023, and 1% in 2024 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and -2% in 2024 (YTD) – indicating that BCS underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BCS face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The bank’s profitability numbers were slightly ahead of the consensus estimates in the third quarter of 2023. It reported total revenues of $7.9 billion – up 13% y-o-y, primarily driven by a 17% increase in Barclays International and a 5% rise in Barclays UK segments. The international unit primarily benefited from growth in sales & trading and consumer, cards, & payments categories. On the cost front, total expenses as a % of revenues witnessed an unfavorable increase in the quarter. Overall, the profit before tax improved by 3% y-o-y to $2.39 billion (Note – Barclays originally reports in GBP (Pound), the same has been converted to USD for ease of comparison).

Relevant Articles
  1. Barclays Stock Is Up 38% YTD, What’s Next?
  2. Barclays Stock Is Undervalued
  3. Where Is Barclays Stock Headed?
  4. Barclays Stock Is Undervalued
  5. What To Expect From Barclays Stock?
  6. After Earnings Miss In Q2, Where Is Barclays Stock Headed?

The bank’s top line grew 2% y-o-y to $24.6 billion in the first nine months of FY 2023. It was mainly because of an 8% growth in Barclays UK and a 21% rise in consumer, cards & payments divisions, partially offset by a 6% decline in the corporate & investment bank segment. Notably, the corporate & investment bank unit suffered due to lower sales & trading and investment banking revenues. On the expense side, total expenses as a % of revenues decreased over the same period, thanks to a drop in litigation and conduct costs. Altogether, profit before tax increased 12% y-o-y to $8.02 billion.

Moving forward, we estimate Barclays’ revenues to touch $32.09 billion in FY2023. Additionally, BCS’s annual GAAP EPS is likely to remain around $1.49. This coupled with a P/E multiple of just below 6x will lead to a valuation of $9.

 Returns Jan 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 BCS Return 1% 1% -26%
 S&P 500 Return -2% -2% 109%
 Trefis Reinforced Value Portfolio -4% -4% 582%

[1] Month-to-date and year-to-date as of 1/5/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates