2025 hasn’t been an amazing year for the BP (LSE: BP.) share price. While the FTSE 100 index has climbed about 14.5%, the oil stock has only risen about 4.6%.
Is there potential for an improvement in performance at some point? City analysts seem to think so.
Here’s where they see the stock going in the medium term…
Analysts are bullish
At present, the average analyst price target for BP shares is 450p. That’s about 9% above the current share price.
Add in the dividend yield of 5.8% here, and investors could be looking at attractive, double-digit returns if that price target was to be hit. A near-15% return in a year or so from a blue-chip stock is without a doubt a great result.
Take that forecast with a pinch of salt
The thing is, with a stock like BP, share price forecasts are pretty meaningless. Realistically, no one has any idea where this stock is going in the future.
The reason why is that oil prices – a key driver of BP’s revenues, earnings and share price – fluctuate from day to day (impacted by factors such as economic growth forecasts, geopolitical tension, and stockpiles). So, it has little control over aspects of its business or of its stock performance.
For example, a month ago, Brent crude oil prices jumped to near $67 per barrel on the back of geopolitical concerns (pushing the share price up). Yet today, they’re near $61 with concerns over an economic dip and a growing oil glut (the shares have fallen as a result).
So, how can analysts possibly come up with an accurate share price forecast when there’s such volatility in a key part of the model? By 2026, oil prices could be anywhere from $50 to $80 per barrel.
Too speculative for me
It’s this unpredictability that turns me off oil shares like BP. To my mind, they’re quite speculative in nature.
I have no idea where oil prices are going to be next year. As a result, I don’t know where the BP share price might be.
By contrast, with a company like software and cloud computing powerhouse Microsoft (which I think is worth considering as a long-term investment), I can make predictions about revenue and earnings growth with far more certainty. There’s still uncertainty due to the valuation (which may fall), but at least I can be relatively confident that the company is going to be growing in the years ahead. Note that it recently hiked its personal Microsoft 365 prices massively.
I’ll point out that with BP, there are also a few long-term risks I’m concerned about. One is the growing interest in nuclear power – this adds some uncertainty.
A dividend play
Of course, many investors invest in BP for the dividends. And the yield here isn’t bad.
If someone doesn’t care about price growth, the shares could be worth considering. Assuming the dividend isn’t cut (it has been cut in the past), the stock could be a cash cow.
I just feel there are better opportunities in the market for investors today. Why take the risk with an unpredictable stock like BP when there are so many dividend-paying companies that are almost guaranteed to experience growth in the years ahead?
