Standard Chartered (LON: STAN) share price surged by more than 6.50% on Friday after the company published strong financial results. It roared back to 645p, its highest level since January 9th. It has surged by more than 13% from its lowest point this year.
Analyst boosts STAN targetStandard Chartered published strong financial results even as concerns about its Chinese exposure remained.
The company’s operating income rose by 7% in the fourth quarter to $4 billion. Its net interest income jumped by 6% to $2.4 billion while its wealth management revenue soared by 16%.
Most importantly, Standard Chartered’s Return on Tangible Equity (RoTE) rose by 2% to 10.1%. RoTE is an important number that is calculated by dividing post-tax profit with the tangible equity and is one of the most important profit metrics.
Some analysts believe that Standard Chartered’s shares have more upside in the long term. In a note, analysts at Shore Capital noted that the stock could jump to 1,000p in the coming months.
If this is accurate, it means that it could jump by more than 54% from the current level. It also means that the stock will have to surge to its highest point since 2015.
The analyst believes that the company is inherently undervalued. For one, it trades at a price-to-book value of 0.6. The P/B ratio is a number that looks at the value of its assets that are shown in its balance sheet. A number less than 1 is a sign that a bank is being highly undervalued.
This discount is mostly because of its Chinese business, where Standard Chartered makes a substantial amount of money. The economy is slowing down, foreign direct investment (FDI) has tumbled, interest rates have fallen, and the real estate sector has plummeted.
The PBoC slashed its interest rate unexpectedly this week in a move that could hurt the country’s banks, including StanChart.
Further, the company has an exposure to other emerging market countries that are not doing well. While it exited some African markets, it still has a presence in some like Kenya, Nigeria, Ghana, South Africa, and Uganda.
Standard Chartered share price forecast
Turning to the weekly chart, we see that the STAN stock price formed a double-top pattern at 765p between January and October 2023. The neckline of this pattern was at 576p. In price action analysis, this is one of the most bearish signs.
However, in the long term, the stock has formed an ascending channel, which you can see in red. It has now moved above the lower side of this channel. It is also attempting to move above the 100-week moving average.
Therefore, the outlook for the stock is neutral, with the key support and resistance levels to watch being at 575p and 678p. A break below the support at 576p will point to more downside while a move above 677p will signal more gains to the upper side of the channel at 750p.
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