Will Barclays See Rising Prices?

With shares of Barclays (NYSE:BCS) trading around $18, is BCS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Barclays is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management, and investment management services. The company operates in eight segments: U.K. Retail and Business Banking, Europe Retail and Business Banking, Africa Retail and Business Banking, Barclaycard, Barclays Investment Bank, Barclays Corporate Banking, Wealth and Investment Management, and Head Office and Other Operations. Banking and capital markets services are just about a requirement for most consumers and companies around the world.

Barclays will lay out its plans to meet new financial regulations in Britain, when the bank reports second-quarter earnings Tuesday. Analysts expect the bank to sell bonds known as CoCos and raise equity, or a combination of the two, in response to new U.K. rules on capital. The bank is in talks with regulators about how to meet the new rules.

T = Technicals on the Stock Chart are Mixed

Barclays stock has not done very well in the last few months. The stock has been consolidating after a strong run during the second half of last year. Analyzing the price trend and its strength can be done using key simple moving averages.

What are the key moving averages? They are the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Barclays is trading slightly above its flat key averages, which signals neutral price action in the near-term.

BCS

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Barclays options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Barclays Options

33.54%

63%

61%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts, and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. In addition, the last four quarterly earnings announcement reactions can help gauge investor sentiment on Barclays’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Barclays look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

N/A

-50.10

N/A

-62.60

Revenue Growth (Y-O-Y)

N/A

N/A

N/A

N/A

Earnings Reaction

-1.31%

9.13%

-0.74%

8.98%

Barclays has seen mixed earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Barclays’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Barclays stock done relative to its peers, Deutsche Bank (NYSE:DB), HSBC (NYSE:HBC), UBS (NYSE:UBS), and the overall sector?

Barclays

Deutsche Bank

HSBC

UBS

Sector

Year-to-Date Return

9.18%

7.25%

5.43%

20.90%

8.13%

Barclays has been a relative performance leader, year-to-date.

Conclusion

Barclays provides essential financial services to companies and consumer worldwide, and the company is set to announce some positive changes during their second quarter earnings call on Tuesday. The stock has remained stagnant for most of the last several months. Over the last four quarters, investors have had mixed feelings about the company, as earnings and revenues have been mixed. Relative to its peers and sector, Barclays has been a year-to-date performance leader. WAIT AND SEE what Barclays does this coming quarter.

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