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For me, height BT (LSE:BT.A) share price represents something of a missed opportunity. I had a close look at it for about £1, but didn’t make the investment I intended. The stock has gone up several times.
Shares in FTSE 100 the company is now up 26% over the past 12 months, and up 35% over the past six months. But can the share price rise? However, the evidence below suggests that it is possible.
The future is bright
“The future is bright, Orange future” was the slogan of another telco — now EE — but I think it’s fair to say that the future looks increasingly bright for BT.
For years, the company’s prospects have been held up by uncertainty over the huge cost of laying fiber to the premises (FTTP) across Britain.
In fact, it costs around £85m to roll out FTTP to 100,000 homes. And recent reports suggest the company will aim to reach another 10m homes – meaning it’s spending a lot of money on fiber infrastructure in the past.
Having succeeded in capital spending, the administration has now promised £3bn of savings every year until the end of the decade. This gave investors a lot of certainty.
Benefits will improve
Currently, analysts are predicting that BT will earn 14.3p per share in the 2025 financial year (this year) and then 15.3p in both 2026 and 2027. Investors will hope that this is part of an evolving earnings trend that will see continued growth to date. at the end of the decade. As costs are set to drop significantly, it is more likely.
Based on the current price and these forecasts, the telecommunications company trades at 9.8 times forward earnings and 9.1 times 2026 and 2027 earnings. That’s below the index average, and corresponds to a 5.7% dividend yield.
The budget is actually expected to rise from 8.1p this year to 8.3p in 2026 and 2027. That’s a good sign.
Analysts support BT
Stocks are covered by analysts from major financial institutions who issue ‘buy’, ‘sell’, or ‘hold’ ratings and provide a target price — their opinion of fair value.
Despite the stock’s rise, analysts continue to back BT, with a price target of £2.08, which means the stock is undervalued by 43.9%.
However, we should know that three analysts – out of 17 – have negative views on the stock and actually believe it is overvalued.
In general, this reflects the fact that spending so much on fiber and the resulting net debt position – around £20bn – represents a huge risk.
This debt situation undoubtedly makes BT vulnerable to economic shocks, and I would suggest that it is what drives any ‘bearish’ views.
Employee impact
Finally, while I am optimistic about BT and its prospects in the long term, I believe that the impact of budget inflation may delay interest rate cuts. This could be a problem for BT, the company that carries most of the debt.
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