The BT Group (LSE: BT.A) share price has doubled in the past five years. How much higher can it go?
One website — not an established investment site — tips BT to grow around 25% a year between now and 2030. That’s a trebling to around 690p in five years.
But we need to be wary of such price forecasts, especially when they don’t come from investment firms with expertise to back them up. And even with expertise, we need caution.
What’s the reasoning behind share price targets? Do earnings forecasts justify them? That 690p target’s backed by… nothing. It just looks like unsupported wild guesswork. I mention it here mainly as a warning to be careful.
But while this example seems just fantasy, I do think BT shares could provide further growth in the next five years.
Analyst targets
Analyst price targets summarised by Yahoo and by MarketScreener are little puzzling. The average broker target is at around 209p. And that’s slightly below the current price — even though a majority of brokers have BT as a Buy. But it’s skewed by one very low target of 130p — which is surely way too pessimistic, isn’t it?
Forecasts for earnings per share (EPS) by 2027 currently vary between around 16p and 18p — it depends on who’s assessing the analyst consensus. And for 2028, we should probably expect a fairly modest further rise. Projecting that forward a couple of years, assuming a slowing of the current growth rate, we might see EPS of close to 20p by 2030.
If BT’s forward price-to-earnings (P/E) ratio of 15 holds, it suggests a share price of around 300p by then. That’s a gain of around 40% between now and 2030. On top of that, we could be looking at a further 20% or more from dividends.
Do I think that’s reasonable? Well, there’s definitely at least one finger in the air in all that, and plenty could happen between now and then. But it’s my best guess for now.
Growth drivers
What major factors do I think could contribute to long-term BT share price growth? The big one has to be the planned rollout of Openreach full fibre broadband to 25 million premises by the end of 2026.
Revenue’s likely to be flat this year. But capital expenditure has passed its peak, and BT expects free cash flow to reach £2bn by 2027 — and £3bn by 2030.
The company has also hinted at the possibility of spinning off Openreach, with some analysts suggesting a valuation of around £30bn. That’s higher than BT’s £21bn market-cap, though without accounting for debt (market cap plus debt comes to around£41bn). A split might well provide better total value for shareholders.
Net debt of £19.8bn could still be a killer. And if BT doesn’t use some of its cash flow to get it down, I could see it doing some damage to future share valuations.
But for me, BT’s steadily transforming from a debt-ridden monster to avoid into a growth prospect that’s definitely worth considering.
