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Do you remember the days when the P.A. (LSE: BP.) The share price was fairly stable, expected to continue rising over the long term and we all thought it was a safe investment to help fund our retirements? Happy days.
But then oil went bad, oil companies became pariahs, and people started going to jail for trying to stop it all.
BP's price drop in 2020 seemed exaggerated. And in retrospect, that's how it was. But the recovery that soon began has been weakening this year.
So what is it?
What will it be then? Is BP, along with all those other dirty planet destroyers, doomed to oblivion? Or is industry our savior, so that we continue to prosper until renewable energy can truly meet all our needs?
As with most things in life, the truth surely lies somewhere between the extremes. I reckon BP shareholders could still have a few years of big dividends coming their way, with a very nice 5.8% yield in play this year.
And, depending on where the oil price goes, I think the stock price could recover through 2025 as well.
But what do the experts think? Well, I say experts, but I'm really referring to all those forecasters who so often seem to have the ability to pull numbers out of thin air.
the experts
Broker forecasts and price targets are actually not a good indicator of whether we should buy a stock. But they can help shed some light on the latest sentiments and help us see how our own thoughts fit into the market.
So I take them into account cautiously when I think about where share prices might go next.
Different sources appear to have wildly different estimates on average broker price targets for BP. Some suggest around 530p, while the Financial times It has a median of 610p. However, the Financial Times only comes from two brokers.
So let's split the difference and say 570p in 12 months. Where would that take us?
price change
At the time of writing, the BP share price is at 384 pence. Therefore, it would mean a huge jump of 48%. It would reduce the dividend yield to 4%, which still seems fair to me.
Dividend investors who agree with City's price target might consider getting in before the price rises. But keep in mind that weather forecasters probably have a better reputation for accuracy.
A share price of 570p would lift the forecast price-to-earnings (P/E) ratio for 2025 to just under 10, from the current estimate of 6.6. However, it would depend a lot on how oil prices go, which are now around $71 a barrel.
Under historical circumstances, I would consider BP to be a spectacular buy at the current price. But long-term concerns about the oil industry could sink us into an (electric) bus.
At least the forecasters seem to think BP stock is cheap now, although I can't make up my mind.
