The BT Group (LSE:BT.A) share price has been on a remarkable run. Since the start of May 2024, shares have climbed 91.5% from around 105p to just over 200p today. That means a £1,000 investment two years ago is now worth about £1,915.
But the question now is: can it continue to climb even higher to 300p? Here’s what the experts are saying.
The rally might not be over yet
There’s a long list of institutional analysts following this FTSE 100 enterprise. But among the most bullish stands Berenberg. And just last month, it raised its share price target for BT from 250p to 300p following the company’s latest results.
Specifically, it cited that the 4% increase in average revenue per user (ARPU) from BT’s Openreach arm signals the business isn’t having to work as hard as originally feared to compete with alternative network operators. And that while broadband line losses will likely continue for a few more years, this should start to slow as fibre coverage expands.
Yet perhaps most interesting is the deregulation angle. Berenberg said a return to cost-based access price regulation after 2031 remains in its forecasts, but that deregulation’s looking increasingly likely.
If Openreach is eventually allowed to launch geographical discounts and gain more pricing freedom, the share price forecast jumps even higher to 350p!
In this scenario, BT shares could secretly be a terrific stock to buy right now. But as every experienced investor knows, forecasts aren’t set in stone. So what do investors need to watch that could derail Berenberg’s bullish outlook?
What could hold BT back?
The bull case for buying BT shares is clear. The company has a fibre rollout that is ahead of schedule, a recovering consumer division, and an Openreach business that is proving more resilient than many feared. And combined, these forces are translating into new earnings momentum.
Providing these trends continue, that means more free cash flow generation becomes available to pay down debts, cover infrastructure spending, and issue juicier dividends.
However, even investors as bullish as Berenberg have flagged several crucial risks.
BT still carries a significant debt load, and competition from alternative network operators like CityFibre and Hyperoptic isn’t going away. If broadband line losses persist longer than expected or pricing pressure intensifies, the earnings recovery might not be as impressive as bullish investors hope.
So is this a risk worth taking? For me, the heavy debt burden’s a turn-off. Management definitely seems to be taking the right steps to bolster cash flows and tackle the elevated gearing. But until I see more progress made in deleveraging the balance sheet, BT is staying on my watchlist.
But there’s no denying the business definitely has the potential to climb from here.
Should you invest £5,000 in Bt Group Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
