After years of lacklustre performance, the BT Group (LSE:BT.A) share price is finally starting to move back in the right direction. Over the last 12 months, the stock’s climbed more than 40%, delivering a total return of over 45%, including dividends.
By comparison, its parent index, the FTSE 100, has generated a total return of 17.2%. That’s more than double its long-term average, and yet BT’s still emerged as a market beater, transforming a £5,000 initial investment into £7,260. But could this be just the tip of the iceberg?
Optimistic forecasts
As a crucial, essential business for the British economy, BT shares often receive a lot of attention from institutional investors. After all, the firm’s responsible for the bulk of Britain’s telecommunication infrastructure, which is in constant demand regardless of economic conditions.
Yet even after its impressive run, some experts think there’s still some more room for growth. On the bull side, the analysts at Barclays seem to be among the most optimistic, with a 12-month share price target of 300p.
Compared to where BT shares trade today, these projections suggest the stock could climb another 46.3%. That’s even better than what the stock’s done in the last 12 months. And if these forecasts are accurate, it suggests that a £5,000 investment today could become £7,317 by September 2026.
Balancing risk with reward
Barclays’ investment thesis points towards the group’s accelerating rollout of fibre broadband and 5G network investments. With legacy infrastructure being upgraded and modernised, the company’s able to lower its operating costs – an efficiency gain management’s slowly leveraging to bolster margins as well as pay down debts.
That’s obviously good news, but there remain some prominent threats and challenges that even these optimistic analyst teams have identified.
The increasingly competitive landscape’s already dragging down the performance of its Openreach segment. In fact, rivals including TalkTalk, Virgin Media O2, and CityFibre are already suspected to be targeting BT’s wholesale customers. And with alternative 5G service providers now available, the company’s retail-focused business is also seeing pricing power tested.
Barclays also highlighted that management’s internal medium-term targets for its 2027 fiscal year are a bit too optimistic. And if that hunch is correct, investors may find themselves disappointed if the firm fails to meet its own objectives.
The bottom line
BT Group’s undergone some notable improvements in recent years. The quality of earnings is improving alongside its financial health. However, there’s still a long way to go before BT can be considered to be in tip-top shape. After all, it still has over £23bn of debts & equivalents on its balance sheet versus only £2.8bn in cash & equivalents.
Buying BT shares today could still prove lucrative if management’s able to continue making progress in its turnaround strategy. But that’s far from guaranteed. And with a long road ahead, I think investors may be better served looking elsewhere for growth opportunities.
