Do you remember the days when the BP (LSE: BP.) share price was fairly stable, expected to keep going up over the long term, and we all thought it was a safe investment to help fund our retirements? Happy days.
But then oil became evil, oil companies turned into pariahs, and people started going to jail for trying to stop it all.
The BP price crash of 2020 seemed overdone. And with hindsight, it was. But the recovery that soon kicked in has been going off the boil this year.
So what is it?
What’s it to be, then? Is BP, along with all those other dirty planet destroyers, doomed to oblivion? Or is the industry our saviour, to keep us prospering until renewable energy really can fulfil all our needs?
As with most things in life, the truth surely lies somewhere between the extremes. I reckon BP shareholders could still have a good few years of fat dividends coming their way, with a very nice 5.8% yield on the cards for this year.
And, depending on where the oil price goes, I think the share price might well rebound into 2025 too.
But what do the experts think? Well, I say experts, but I’m really talking about all those forecasters who so often seem to have the ability to pluck numbers out of thin air.
The experts
Broker forecasts and price targets are really not a great pointer to whether we should buy a stock. But they can help shed some light on the latest sentiment, and help us see how our own thoughts fit in with the market.
So I cautiously bear them in mind when I’m thinking about where stock prices might go next.
Different sources seem to have wildly different estimates of average broker price targets for BP. Some suggest around 530p, while the Financial Times has a median of 610p. The FT’s is only from two brokers, though.
So let’s split the difference and say 570p in 12 months’ time. Where would that get us?
Price change
At the time of writing, the BP share price is at 384p. So it would mean a nice big jump of 48%. It would drop the dividend yield to 4%, which still seems fair to me.
Dividend investors who agree with the City’s price target might want to consider getting in before the price rises. But do bear in mind that weather forecasters probably have a better reputation for accuracy.
A 570p share price would lift the forecast 2025 price-to-earnings (P/E) ratio to a bit under 10, from the current 6.6 estimate. It would depend a lot on how oil prices go though, now around $71 a barrel.
Under historical circumstances, I’d consider BP to be a screaming buy at today’s price. But long-term worries about the oil industry could throw us under [an electric] bus.
At least the forecasters seem to think BP shares are cheap now, even if I can’t make up my mind.
