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Lloyds‘ (LSE:LLOY) shares have certainly given investors reason to celebrate over the past two years. Back in late August 2024, the shares were trading around 58p. Since then, they’ve catapulted past the £1 mark to reach today’s level around 112p.
That’s a two-year return of 93.1%, or 38.96% annualised (dividends excluded).
Can you imagine if this momentum continues for another two years? The shares would be changing hands at 216p each, potentially turning a £1,000 investment today into over £2,000 when you include dividends.
Not many investments could double your money in just two years. But let’s be rational — what’s the realistic chance of that happening?
The wider picture
Markets are seldom consistent, and what happens one year is never guaranteed to happen the next. Viewing price performance over a short-term period doesn’t give us any real indication of a company’s strength.
Looking at longer periods gives us a better idea of how well a business navigates market cycles. But even then, a stock that’s been steadily climbing for decades won’t necessarily continue.
When we zoom out a bit, we see a more sobering view of Lloyds’ long-term annualised returns:
| Period | Price growth | Annualised |
|---|---|---|
| 2 years | 93.1% | 38.96% |
| 5 years | 153% | 20.4% |
| 10 years | 110% | 7.7% |
Looking at those numbers, an annual return somewhere closer to 10% seems more realistic. How does that weigh up against broker forecasts?
Moderate optimism
As I suspected, analysts don’t expect a 100%+ climb in the coming two years. But overall, brokers are leaning towards moderate growth, with a consensus Buy rating and 12‑month price targets clustered between 120–130p.
That would equate to an increase of anything between 7% to 16%, reaffirming my 10% estimate above.
| Broker | Price target |
|---|---|
| Morgan Stanley | 135p |
| UBS | 133p |
| Barclays | 130p |
| Deutsche Bank | 125p |
| Citi | 125p |
| JPMorgan | 121p |
| Berenberg | 117p |
| Shore Capital | 91p |
So why does Shore Capital think the price might fall?
Risks to consider
Shore Capital believes Lloyds’ stock has already priced in much of the good news from higher rates, strong credit performance, and cost cuts. It now sees the UK banking sector as ‘overearning’ relative to a more normal cycle.
After such a long rally, that view’s understandable — and could hold a lot of weight.
From a macro perspective, if GDP growth is slower than expected (or unemployment rises), lenders may struggle to repay loans. The same goes for weakening house prices. Since the bank’s heavily exposed to UK mortgages and unsecured consumer lending, any downturn here would hit its profits.
The bottom line
When it comes to forecasting future growth, it pays to account for market cycles. The longer a rally is drawn out, the closer it gets to peak — but nobody knows exactly when that peak is.
That’s why a diversified portfolio of shares in different sectors helps protect against concentrated cycle risk. Lloyds is one option to consider, but not on its own. The shares could climb further from here, or they could experience a short-term correction.
In the end, does it matter? For investors with a 10-20-year outlook, attempting to time cycles can be unnecessary and tedious. In my opinion, regular monthly contributions tend to iron out the peaks and troughs — and in the long run, it often equates to the same returns.
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Mark Hartley owns shares in Lloyds Banking Group.
