Is Barclays Well-Positioned for the Future?

With shares of Barclays (NYSE:BCS) trading around $14, 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.

Antony Jenkins, promoted to run Barclay after the Libor scandal, pledged to overhaul the bank’s culture, committing to values of integrity and respect. Allegations of fraud on his watch are undermining his plan. Barclays allegedly lied to customers and masked the role of high-frequency traders as it sought to boost revenue at one of Wall Street’s largest private trading venues, New York Attorney General Eric Schneiderman said in a civil complaint filed June 25. He cited a pattern of misleading and false representations that went on as recently as April. The first allegations of new misconduct since Jenkins was named CEO of the London-based bank in August 2012 mark a setback in his efforts to break with the past and sent shares plunging the most since he took over.

T = Technicals on the Stock Chart Are Mixed

Barclays stock has been in a range over the past couple of years. The stock is currently surging higher after hitting lows for the year. 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.

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

29%

93%

90%

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

Put IV Skew

Call IV Skew

July Options

Steep

Average

August Options

Steep

Average

As of Friday, there is an 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 very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

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