Barclays PLC

Barclays PLC (LON: BARC) is an FTSE 100 Index-listed British universal bank. It provides consumer banking and payments operations around the world, along with global corporate and investment banking services.

Investment Rationale – SELL at GBX 170.72

• Profit Booking: The company’s share price reflected a jump of ~18.68% in the past 1 month and presents a case of profit booking for the investors according to their risk appetite.
• Rise in Operating Expenses: The Group reported an increase in total operating expenses to £4.1 billion in Q1FY22, compared to £3.6 billion in Q1FY21. This includes litigation and conduct charges of £0.5 billion with regards to the over-issuance of securities by Barclays Bank PLC in the US.
• Macro Headwinds: Current trading environment has been very volatile owing to a 40-year peak in inflation levels, reported at 9% in April 2022. This can also give rise to credit impairment, due to the inability of consumers to repay loans owing to the higher cost of living.
• Technical Indicator: The stock of the company is trading close to its upper Bollinger band with a high 14-day RSI level of ~72.71, indicating an overbought stance.

One Year Share Price Chart

(Source: Refinitiv, Analysis conducted by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Conclusion

Based on the attractive notional gains in the short-term, macroeconomic instabilities, increase in operating expenses, bearish technical indicators, coupled with the unfavourable Valuation conducted above, we have given a "SELL" recommendation on Barclays PLC at the current market price of GBX 170.72 (as on 27 May 2022, at 01:34 PM GMT+1). 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 5: Dividend Yield may vary as per the stock price movement.

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