With the BT Group (LSE: BT.A) share price sitting at around 185p, a forecast above 300p might seem a bit far-fetched. It would imply a gain of around 60% — after BT shares have already risen close to 30% in 2025. But it’s around the top of the range of broker price targets at the moment.
To try to be perhaps a bit more realistic, the most recent targets are more in the 215p-220p range. But that would still mean a price rise of 15%-20%. And these targets are relatively short term anyway, so maybe not close to where analysts think the BT share price might go over the full year.
Check the value
Looking closer at broker forecasts, we see BT shares on a forward price-to-earnings (P/E) ratio of around 14. And that might not exactly sound like a screaming Buy valuation. Earnings growth is only predicted to be modest, so it’s hard to put a growth stock premium on the valuation based on that.
But for me, the crucial thing to look at with BT is cash flow. And, critically, with BT’s broadband rollout rushing every closer to completion, capital expenditure should be falling. Something like two-thirds of UK homes are now reached by fibre-to-the-premises, and the same number have 5G mobile coverage.
As this all nears completion, hopefully it should leave more cash free for boosting the dividend — still on a respectable 4.4% forecast yield, even after the share price increase of 2025. At full-year time in May, BT confirmed its “progressive dividend policy which is to maintain or grow the dividend each year“.
Count the cash
So what’s BT saying about its cash expectations?
At first-half results time in November, CEO Allison Kirkby said: “We remain on track to deliver our financial outlook for this year, our cash flow inflection to c.£2.0bn in FY27 and c.£3.0bn by the end of the decade, and we’re announcing an increased interim dividend to 2.45 pence per share.”
To put that into context, BT reported £1.3bn normalised free cash flow for the 2024 full year. So we’re looking at the prospect of that soaring by 130% over the course of six years. Maybe short-term P/E predictions aren’t at rock bottom. But those kind of cash flow prospects make me look at ambitious share price targets with a more optimistic view.
Watch the debt
Saying that, I do think modest earnings per share (EPS) forecasts could hold the BT share price back. If slowing expenditure doesn’t start lifting EPS soon, those cash flow targets might look less achievable. And net debt of £20.9bn could make investors nervous too.
So what of those price targets? I reckon the upper end of over 300p could be too ambitious. The recent 215p-220p suggestion looks more realistic to me. But we’d need to hope the shares don’t fall back again, as they tend to do in cycles. Overall, I rate BT as worth considering for its long-term prospects.
