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For me, the rise B.T. (LSE:BT.A) share price represents something of a missed opportunity. I had looked at it closely at around £1, but didn't make the investment I intended. Since then, the stock has risen several times.
Actions in the FTSE 100 The company is now up 26% in the last 12 months and 35% in the last six months. But can the share price go up? Well, the evidence below suggests that it can.
The future is bright (more)
“The future is bright, the orange of the future”was the slogan of another telco, now EE, but I think it's fair to say that the future is looking increasingly bright for BT.
For years the company's prospects have been held back by uncertainty around the huge costs of installing fibre-to-the-premise (FTTP) across Britain.
In fact, rolling out FTTP to 100,000 homes costs around £85 million. And recent reports suggest the company will try to reach another 10 million homes, inferring that most of its spending on fiber infrastructure is a thing of the past.
Having passed the capital spending peak, management has promised £3bn of annual savings until the end of the decade. This has provided investors with much more security.
Profits will improve
Analysts currently forecast BT will earn 14.3p per share in fiscal 2025 (this year) and then 15.3p in both 2026 and 2027. Investors will hope this is part of a trajectory of improving earnings which will see continued growth until the end of the decade. Since costs will decrease dramatically, it is very possible.
Based on the current price and these forecasts, the telecommunications company is trading at 9.8 times future earnings and 9.1 times earnings for 2026 and 2027. This is lower than the index average and is complemented by a profitability by dividend of 5.7%.
In fact, the dividend is expected to rise from 8.1p this year to 8.3p in 2026 and 2027. That's a good sign.
Analysts back BT
stocks are covered by analysts at major financial institutions who issue “buy”, “sell” or “hold” ratings and provide price targets – their opinion of fair value.
Despite the stock's rise, analysts continue to back BT, with an average share price target of £2.08, inferring the stock is 43.9% undervalued.
However, we must acknowledge that three analysts (out of 17) have negative opinions on the stock and, in fact, believe it is overvalued.
Overall, this reflects the fact that the huge spending on fiber and the resulting net debt position (approximately £20bn) represents a considerable risk.
This debt position undoubtedly makes BT vulnerable to economic shocks, and I would suggest it is the driving force behind any “bearish” views.
The labor impact
Finally, while I am positive on BT and its long-term prospects, I think the inflationary impact of the budget may hold back interest rate cuts. This is potentially a problem for BT, a company that has a lot of debt.
