Will Barclays See Its Stock Rise?

With shares of Barclays (NYSE:BCS) trading around $17, 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 recently reported earnings, with the British bank’s profit rising to 728 million pounds ($1.2 billion) versus a loss of 13 million pounds a year ago. Barclays was still hurt by its slumping fixed-income business, which caused the income from its investment bank to fall. Barclays is also facing an investigation by British regulators for possibly fixing foreign exchange markets. Several other European banks including UBS (NYSE:UBS), which reported earnings on Tuesday, are facing investigations related to the possibility that they may have manipulated foreign currency markets.

T = Technicals on the Stock Chart Are Weak

Barclays stock has been in a range over the past couple of years. The stock is currently trading sideways and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? 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 below its rising key averages, which signals neutral to bearish price action in the near-term.

BCS

Source: Thinkorswim

Taking a look at the implied volatility 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

28.39%

13%

11%

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

Put IV Skew

Call IV Skew

November Options

Steep

Average

December Options

Steep

Average

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

E = Earnings Are Mixed Quarter Over Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions 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 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

N/A

-124.19%

-230.21%

-50.1%

Revenue Growth (Y-O-Y)

N/A

2.11%

29.82%

-6.97%

Earnings Reaction

1.08%*

0.69%

-1.31%

9.13%

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.

*As of this writing.

P = Weak Performance Versus Peers and Sector

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

target=”_blank”>NYSE:UBS

) — and sector?

Barclays

Deutsche Bank

HSBC

UBS

Sector

Year-to-Date Return

-0.06%

10.82%

4.13%

23.63%

10.63%

Barclays has been an under-performer, year to date.

Conclusion

Barclays is a financial services company that strives to support consumers and companies around the world. The company is facing an investigation by British regulators for possibly fixing foreign exchange markets. The stock has been in a range over the last couple of years and is currently trading sideways. Over the last four quarters, investors in the company have had mixed feelings, as reported earnings have been up and down. Relative to its peers and sector, Barclays has been a weak year-to-date performer. WAIT AND SEE what Barclays does this coming quarter.

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