Where will the BP share price trade in 2026?

The BP share price could rise in value over the next couple of years as the company rolls out its renewable energy plan, says this Fool.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A young woman sitting on a couch looking at a book in a quiet library space.

Image source: Getty Images

I think the BP (LSE: BP) share price looks undervalued, but it is challenging to determine how much the business could be worth five years from now. 

I think three scenarios could impact the company’s valuation and market value over the next couple of years. 

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Three different scenarios

In the best-case scenario, oil prices will remain high over the next half decade. If it returns to $80 a barrel and stays there, the oil major has the potential to generate around $13bn a year in profits. 

This could be enough to support further share repurchases, balance sheet deleveraging, and investment in renewable energy. If this scenario develops, I think the stock could potentially double in value. 

Indeed, the BP share price is trading at a forward price-to-earnings (P/E) multiple of around 6.5. That is around half of the broader market average. If it continues to return significant amounts of cash to investors and invests for the future, I reckon the market will re-rate the stock to a higher multiple. 

In the base-case scenario, oil prices will trade between $50 and $70 a barrel. It has traded within this range for much of the past two years. In this scenario, BP still has the potential to generate billions of dollars in profits every year, but it might not be able to return as much cash to investors as it may like. 

Although it could take longer, I still think the company’s valuation will ultimately rise in this scenario. 

In the worst-case scenario, the price of oil will plunge to its pandemic lows. This scenario could unfold if the global economic recovery stalls, or oil output surges. 

In this situation, I think it is likely BP’s profits will evaporate. The company will struggle to cover its dividend, and future investments in renewable energy will have to be pared back. 

The outlook for the BP share price

I think the most likely scenario for the company over the next couple of years will be something between the best- and base-case scenario.

The price of oil will remain at, or near, recent highs, and I think management will look to return significant amounts of cash to investors. 

Still, there is no guarantee the market will re-rate the stock to a higher multiple. BP needs to convince investors it is preparing for the future with renewable energy assets. That could take longer than a couple of years. On its current roadmap, the group wants to quintuple wind and solar energy generation by 2025.

The market is doubtful the company can hit this target. But if it can, it could be an excellent boost for the stock as the corporation proves it is serious about its green energy ambitions. 

Considering all of the above, I would be happy to buy the stock for my portfolio for the next five years. 

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Senior woman wearing glasses using laptop at home
Investing Articles

SSE shares are up 15% since the market correction! Should I buy?

Jabran Khan looks at why SSE shares have been on an upward trajectory in recent weeks and decides if he…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

After crashing 29%, Spectris shares look cheap to me

After peaking at 4,167p last September, Spectris shares have slumped by over 29%. But I see deep value in the…

Read more »

British Pennies on a Pound Note
Investing Articles

Here is why I added this dirt-cheap FTSE 100 penny stock to my holdings!

Jabran Khan explains why he added this dirt-cheap FTSE 100 stock to his holdings and is excited by its recovery…

Read more »

Woman looking at a jar of pennies
Investing Articles

3 FTSE 100 penny stocks! Which is the cheapest buy?

Our writer examines three penny stocks that feature in the FTSE 100 index to ascertain whether they have a place…

Read more »

Arrowings ascending on a chalkboard
Investing Articles

Is the Vodafone share price an opportunity at current levels?

Jabran Khan looks at the current Vodafone share price and decides if he would add the shares to his holdings…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

4 gems I’d include in my Stocks & Shares ISA

Jon Smith explains some of the top stocks he's thinking about including in his Stocks and Shares ISA a we…

Read more »

Compass pointing towards 'best price'
Investing Articles

At 85p, are Rolls-Royce shares a no-brainer buy? 

The Rolls-Royce share price look very cheap right now. And I think this might be my last chance to buy…

Read more »

positive mental health woman
Investing Articles

My £3-a-day blue-chip passive income plan

Our writer sets out his passive income plan of investing a few pounds each day in top stocks.

Read more »