The FTSE 100 stock has enjoyed the odd rally since, but trading at 208p today (1 June) it’s still miles below its peak. It’s a very different beast today, but I still think investors are getting it wrong. Most will remember its subsequent struggles rather than the glory days. But again, BT has moved on.

Why did the shares struggle for so long?

BT has been fighting battles on multiple fronts. Competition intensified as smaller, more agile rivals chipped away at market share. Its costly move into sports broadcasting stretched finances while the group also wrestled with a huge pension deficit and stubborn net debt.

It also had to fund an expensive nationwide full-fibre rollout through Openreach, pouring billions into infrastructure just as inflation and higher interest rates pushed up costs. Sentiment has improved dramatically since chief executive Allison Kirkby arrived in February 2024, when BT shares traded close to 100p. They’ve roughly doubled because investors finally see signs that years of heavy spending may start paying off.

Kirkby has focused aggressively on costs, simplification and cash generation. BT now expects to cut more than £3bn of annual costs by the end of the decade, by using artificial intelligence to slash headcount.

Much of its stonking £15bn Openreach investment is done. BT expects to reach 25m premises with full fibre by the end of 2026, giving it mighty infrastructure scale. Adjusted EBITDA shows a business rebuilding profitability. Slowly, but also steadily:

• 2026 £8.23bn
• 2025 £8.21bn
• 2024 £8.10bn
• 2023 £7.90bn
• 2022 £7.42bn

Group profits were a lot bumpier than that, which BT has pinned on depreciation charges, the timing of fibre investments and wider economic pressures.

Can it complete its turnaround?

2026 full-year results on 21 May showed revenue dipping 4% to £19.6bn, slightly worse than expected. Openreach is growing but it’s shedding customers too – losing 825,000 over last year, and 2.4m over four years. It’s a competitive market, and smaller alt-net rivals are hovering.

Income growth looks modest but consistent, judging by the last five years total dividend per share figures:

• 2026 8.23p
• 2025 8.16p
• 2024 8.00p
• 2023 7.70p
• 2022 7.70p

Today, the trading yield is around 4%. The shares don’t look expensive, with a trailing price-to-earnings ratio of around 11.4.

I think many investors still judge BT through the lens of its bumpy past rather than the company it’s aiming to be. Kirkby wants a leaner, more capital-light business. If BT can monetise its fibre network more effectively while controlling costs, then profits and cash flow could improve sharply. The group is targeting free cash flow of roughly £3bn by the end of the decade.

Some things haven’t changed. Net debt remains stubbornly high at roughly £20bn. I’d like to see clearer evidence that management can bring that down before fully buying into the turnaround story. Still, I think BT has become far more interesting, and I’ll be watching its progress closely from here.

Should you invest £5,000 in Bt Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bt Group Plc made the list?

Harvey Jones does not hold any positions in the companies mentioned.

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But in 2026, its long-awaited turnaround story is beginning to feel real.

The stock’s up about 22% this year as investors react to improved results and cost progress. On top of that, Bharti Enterprises, the Indian telecommunications conglomerate that already owns 24.95% of the company, has signalled confidence in the group.

So could this be the start of one of the UK’s most impressive recovery stories?

Strong results

BT published its FY2025 results on 21 May showing the following key improvements:

• Adjusted EBITDA came in at £8.23bn.
• Profit before tax rose 8% to £1.44bn.
• FY dividend increased 1.96% to 8.32p per share.

Management’s targets include EBITDA growth toward £8.31bn in 2028. Free cash flow that should strengthen as fibre roll-out is completed and capex should reduce once the major build phase ends.

Those are solid numbers, suggesting operating leverage is working — but they are not instant cures. How well it manages cost-cutting exercises could spell the difference between success and failure.

At present, it targets £3bn of cost savings, largely by moving customers to cheaper 5G and fibre broadband products. It has already achieved a reported £1.2bn of these savings.

Its broadband arm, Openreach, added 2.2m customers last year, boosting overall connected premises to about 8.8m. In total, it aims to reach 30m full-fibre premises by 2030, reducing capital demands and improving margins. 

Those moves could double free cash flow over time, but they’re heavily execution-dependent.

So is it good value at the current price?

Analysts using a discounted cash flow (DCF) model estimate the shares trade around 30% below fair value. Consensus forecasts imply earnings growth of roughly 11.86% a year going forward.

That should help drive further price recovery which, when combined with dividends, could deliver decent returns.

The dividend yield is only moderate at 3.7%, but management has signalled intent to grow it annually. It’s also sufficiently covered by earnings, making the stock relatively income-friendly for patient holders.

So could this be the bargain that turns into a big winner? It certainly looks promising — if the forecasts are accurate. But it isn’t risk free.

The largest single concern is the group’s debt of roughly £20bn, which leaves little room to navigate any surprise shocks. Plus, it limits dividend growth or the ability to invest in operations if markets tighten.

Final thoughts…

BT’s high debt means it’s far more exposed to challenges posed by regulatory changes, competition or execution setbacks on the fibre roll-out.

Still, I remain cautiously optimistic. The strong FY results and Bharti’s growing interest are meaningful endorsements, and cost and fibre progress give a believable road map back to strong cash generation.

With most costs now covered, a recovery is certainly on the cards. But impatient investors looking for short-term returns may be disappointed. This looks likely to be a drawn-out 10-20 year journey. So if you’re prepared to wait that long, then it’s worth considering.

For those targeting more rapid returns, I’ve recently covered several higher-growth stocks on the FTSE 100.

Should you invest £5,000 in Bt Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bt Group Plc made the list?

Mark Hartley does not hold any positions in the companies mentioned.

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But that naturally raises the big question: can the momentum keep going, or has the easy money already been made? Let’s find out.

What’s driving the rally?

A big part of BT’s outperformance comes down to the market becoming more comfortable with the business itself.

After spending years in the doghouse, new management’s finally started tackling the group’s stretched financials and operational challenges. And this progress in establishing better cost discipline and superior execution is starting to deliver tangible results.

Its latest trading update revealed stronger-than-expected performance for its Openreach arm, while the rollout of its fibre optic network has now reached 21.4 million premises, on track to hit 25 million by the end of the year.

That matters because BT is now entering into the later stages of its full-fibre buildout. And with other large capex projects like 5G infrastructure also surpassing their peak spending periods, the firm’s free cash flow appears set to grow over the coming quarters.

In other words, management could soon have far greater financial flexibility to pay down its long-standing debt, reduce pension deficits, and bolster dividends. With that in mind, it’s no wonder BT shares are on the march.

But can the FTSE stock continue to climb?  

A mixed bag of opinions

Despite the encouraging progress made, opinions surrounding BT shares are pretty diversified, with no clear-cut overall rating.

For example, JP Morgan recently lifted its target price to 310p, while Bank of America set a 282p target. With BT shares currently trading near 231p today, that clearly signals confidence in the business and its ability to continue implementing better cost controls, superior network quality, and stronger cash generation.

Yet at the same time, the team of analysts at UBS are far less optimistic, placing their share price target at 175p and even issuing a Sell recommendation. And this cautious stance isn’t entirely unjustified.

BT’s days of heavy capital investment are far from over. And while cash generation may improve in terms of bringing down leverage, that also means there’s less capital available for reinvested in growth, potentially creating opportunities for its rivals to take market share.

Don’t forget the firm operates in a fiercely competitive market. So who should investors listen to?

Risks and rewards

BT still has huge scale, a dominant position in UK telecoms, and the potential to keep unlocking value as execution improves. Yet at the same time, the telecoms industry is demanding, and BT has a long track record of disappointing investors, although admittedly under previous leadership.

Overall, BT shares look far more interesting today than they have in years. The company still has a long road ahead, but it’s a story that’s getting increasingly harder to ignore.

Personally, I’m not ready to pull the trigger just yet. But for those looking to invest in a turnaround story that’s still in its early innings, BT shares could be worth a closer look.

Should you invest £5,000 in Bt Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bt Group Plc made the list?

Zaven Boyrazian does not hold any positions in the companies mentioned.

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CEO Allison Kirkby opened with: “FY26 was another year of strong delivery against BT’s strategy. We are building the UK’s digital backbone even faster and further, connecting the country like no one else and accelerating our transformation.“

BT rolled out fibre connections to more than 4.8m premises by the end of March. That’s more than two-thirds of UK homes and businesses covered. Openreach made 2.2m net new fibre connections. And EE’s 5G now reaches 73% of the population.

It all sounds great, so what didn’t the market like on the day?

Record rollout, but…

It isn’t translating into more of the folding stuff. Reported revenue fell 3% to £19.7bn, with adjusted EBITDA flat at £8.2bn. All this expansion costs money, and BT racked up £5.1bn in capital expenditure over the year. And that helped knock free cash flow down 6% to £1.5bn.

Still, the company raised its total dividend 2% to 8.32p per share — for a 3.6% yield. That might not look brilliant at a time when inflation is so high. But management intends “to grow the dividend by low to mid single digit percent per annum in FY27 and onwards until metrics consistent with a BBB+ credit rating are reached; thereafter residual cash flow will be available for enhanced distributions to shareholders.“

So, fair to middling dividend growth until BT’s credit rating steps up a notch, and then bigger distributions of cash. That sounds attractive enough to me as a dividend investor.

But a couple of things still unsettle me.

Rocky road

The share price has risen 25% over the past five years — all since BT hit a pivot point with 2024 full-year results. But if we look at the longer term, it’s all a bit up and down. And BT shares have still had a poor decade, losing a third of their value.

BT’s big net debt poses a hovering background threat too. It edged up to £20.0bn for the year just ended, from £19.8bn the year before.

There’s a tempting strategy for potential investors to consider here. Just keep taking the dividends, and ignore the rest as noise. If nothing is enough to disturb those long-term cash handouts, there’s no need to worry about anything else, right?

What should we do?

Well, it’s never a good idea to take dividends for granted. BT does project normalised free cash flow of around £2.0bn in the 2026-27 year, and up to £3bn by the end of the decade.

The trouble is, we keep hearing these glowing outlooks… while still waiting to see the actual cash at year-end time. And this industry is cyclical in terms of technology too, so it’s hard to make long-term assumptions about capital expenditure.

Once again I’m torn. But on balance, I think investors might do well to consider some of the bigger FTSE 100 dividend yields out there, with better expenditure clarity and less debt danger.

Should you invest £5,000 in Bt Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bt Group Plc made the list?

Alan Oscroft does not hold any positions in the companies mentioned.

The post After BT shares dipped on full-year results, are they a top FTSE 100 dividend buy? appeared first on The Twelfth Magpie.

There was the giant pension scheme and its mighty £20bn net debt pile too, which regularly exceeded the company’s market cap. Attempts to break into areas such as sports streaming looked like risky gambles. Yet BT has proved me wrong by staging a remarkable turnaround. Two years ago, the shares traded around 105p. Today, they sit near 237p , up roughly 125%. How did it manage that?

How did this FTSE 100 stock bounce back?

Chief executive Allison Kirkby has accelerated BT’s cost-cutting programme, sharpened the company’s focus on broadband and mobile, improved customer service scores and simplified products. Investors also welcome signs that BT has finally moved beyond peak spending on its giant Openreach fibre rollout. Kirkby is relaunching the BT Mobile brand as well, to sit alongside EE.

Underlying EBITDA profits have edged steadily higher. The growth isn’t spectacular, but it’s going in the right direction.

• 2025 — £8.21bn
• 2024 — £8.10bn
• 2023 — £7.90bn
• 2022 — £7.60bn
• 2021 — £7.40bn

Growth forecasts remain sluggish. For the year ending 31 March 2026, it expects EBITDA of between £8.2bn and £8.3bn.

Despite that. BT has shrugged off recent stock market volatility to find a fresh pair of legs. Its shares have climbed 6% in a week and almost 14% over three months.

The latest trading update, was published more than two months ago on 5 February. That showed underlying revenue slipping 4% to £5bn, mostly due to disposals. EBITDA fell at a slower 1% pace to £2.1bn, thanks to more cost savings. Further savings should follow as spending on the Openreach network eases. BT anticipates free cash flow of £1.5bn in 2026, down slightly from £1.6bn last year. Yet now it’s swung

Can it beat off some pretty stiff competition?

I have one big worry right now. Sector competition is getting tougher. FTSE 100 telecoms rival Vodafone has regained momentum after its £15bn merger with Three. Smaller, nimbler alt-net rivals keep nibbling away at its broadband customer base, and Elon Musk’s Starlink has entered the fray.

I’ve consistently underrated BT in recent years. As a result, I’ve missed out on a heap of share price growth and dividends. Today’s trailing yield no longer looks especially generous at 3.45%, but the valuation still tempts with a price-to-earnings ratio of around 12.5.

Markets don’t share my scepticism. Even so, telecoms remains brutally competitive and the BT brand still feels jaded to me. Kirkby is clearly up for the fight but I hesitate to buy BT shares today. However, I’ll keep watching BT closely to see if it proves me wrong all over again. It’s may be worth you keeping an eye on too. There could be more surprises ahead.

The post Think the BT share price has finally peaked? Read this… appeared first on The Twelfth Magpie.

Can the party continue, though? Analysts are split, as the table below shows:

So what can we expect over the next year?

Strong momentum

First it’s critical to consider what’s propelled BT over the last year. As I say, it’s down to the telecoms firm’s so-far successful transformation strategy. It’s already achieved £1.2bn of its £3bn cost-cutting plan, targeted through measures like switching customers to cheaper-to-run 5G and fibre broadband from traditional copper networks.

Investors are also encouraged that the company will be spending less on its fibre rollout strategy from this point. The result? As Hargreaves Lansdown analysts note, “that’s good news for future cash flows [as] a much leaner operation is needed to drive long-term growth.”

Finally, BT’s high-margin Openreach infrastructure division continues to benefit white-hot demand. It added a further 571k customers between September to December, latest financials showed. This pushed divisional adjusted EBITDA 2% higher. Openreach has considerable long-term potential as the ongoing digital revolution drives fibre broadband uptake.

What’s the catch?

The problem is, there are many threats facing BT that could send its shares lower again. Yet at current prices of 238.3p, it seems the market is giving little heed to these dangers and only reflecting on its recent successes.

Today its price-to-earnings (P/E) ratio has leapt to 15.8, far above the long-term average of 8-9.

So what are these threats to BT and its share price? One is subdued consumer spending as the Iran War fuels inflation and weighs further on economic growth. The firm’s already struggling to turn around its bottom line — a situation made worse by the enormous competitive pressures it faces — with revenues dropping 4% in the December quarter. This dragged adjusted EBITDA 1% lower.

Rising inflationary pressures could be especially problematic for BT. It could bring the strong progress it’s been making on cutting costs to a crunching halt. But that’s not my main worry. The company’s debts are huge — its net debt was £20.8bn in December, and rising — and Bank of England action to curb inflation could drive its repayment costs sky high.

£5,000 could turn into…

So what could BT shares be worth by this time next year? Returning to those price forecasts I described earlier, a £5,000 investment today will be worth:

• £6,950, based on the most bullish City forecast.
• £3,000, according to the lowest price estimate.
• £4,650, based on analyst consensus.

However, accurately predicting near-term price movements is a difficult task, even for seasoned City brokers. Few expected BT’s share price to soar 45% over the last 12 months. These forecasts could similarly miss their target.

All I can do is take a view on the risks and potential rewards of buying BT shares today. And in my view, I think the FTSE firm’s in danger of sinking given its huge valuation and the rising pressures it faces. This is why I’d rather find other stocks to buy right now.

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But there could be a lot more to come. The company’s earnings growth is strong, its full‑fibre rollout is nearing peak spend, and cost‑cutting is feeding through to higher margins.

Together, these drivers point to a business with rising cash generation and a valuation that still looks unusually low for a national telecoms champion.

So what sort of return could investors be looking at here?

How much potential price gain?

In stock markets, price and value serve very different roles. Price represents the level at which market participants are willing to transact. But value reflects the economic reality of the business and its future cash flows.

For long-term investors, the gap between these measures is highly significant. Market prices tend to converge towards ‘fair value’ over extended periods. This is why recognising that difference can be a key source of enhanced investment returns over time.

To estimate fair value, discounted cash flow (DCF) analysis projects future cash flows and discounts them back to today. The more uncertain those projections are, the higher the return investors demand, increasing the discount rate.

DCF model outcomes can vary, according to the different assumptions used by analysts. Using my own framework — including an 8.5% discount rate — BT shares are 40% undervalued at their current £2.16. That implies a fair value of £3.60 — substantially higher than the present level.

If prices continue to converge toward fair value, this could be a superb buying opportunity if those DCF assumptions prove accurate.

How much dividend income?

Analysts project BT’s dividend yield will be 4.2% this year, although that could go down or up over the years. So a £20,000 holding in the firm (the same as mine) could make investors £10,417 in dividends after 10 years and £50,353 after 30 years.

The figures factor in the payouts being reinvested into the stock to capture the full turbocharging power of dividend compounding.

After 30 years, the total value of the holding would be £70,353 (including the original £20,000 investment). And this would pay an annual income from dividends alone of £2,955.

My investment view

Share price and dividend gains are ultimately supported by earnings growth. A risk for BT is any sudden spike in capital expenditure on network upgrades that could squeeze free cash flow. Another is any increase in regulatory pressure on broadband pricing. Nevertheless, analysts forecast that BT’s earnings will grow by an average of 14.2% a year over the medium term.

This looks reasonable to me considering its Q3 2025 results, released on 5 February this year. The company hit record full‑fibre momentum, passing more than 1m premises for the eighth consecutive quarter. And it affirmed that it remains on track for cash‑flow of around £2bn next year and £3bn by the end of the decade.

In sum, I will be adding to my BT holding very shortly. Meanwhile, other deeply underpriced and high-dividend-yielding stocks have also caught my attention recently.

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These are welcome moves for long-suffering BT shareholders, who’ve seen their shares play out a painful decade. So are we looking at a new golden era for profit gains?

Well, analysts do expect BT’s annual earnings per share to climb 45% by 2028. But they’re split 50/50 on whether the shares are a Buy or a Sell. Why is that? I see a number of possible reasons.

Another down cycle?

The share price gain of the past few years has pushed BT’s price-to-earnings (P/E) ratio up close to 17 now. That might be fine for a company with high-tech growth prospects. But at the same time, BT’s business is highly capital intensive.

In the first half of the current year, we saw an 11% fall in profit before tax. But at the same time, capital expenditure (capex) rose 8% to £2.4bn. The higher capex also knocked a fair old chunk off free cash flow, with a normalised figure down 43%.

BT also isn’t quite the dividend monster we’re used to, at least not in dividend yield terms. With the BT share price so strong, we’re looking at a forecast yield of only 3.8%. That’s about average for the FTSE 100 this year. But dividend investors — who’ve long made up a high proportion of BT shareholders — could do significantly better elsewhere.

BT shares have, for decades, been lurching between bright and gloomy spells. Could we be in for a new downwards cycle? It looks like half the forecasting analysts think so.

The real value?

The P/E can be a bit misleading too, with BT’s net debt appearing interminably stuck around £20bn. The cost of servicing it doesn’t seem so onerous, so it might be just fine. But if we adjust to allow for debt, we nearly double the effective P/E for the business to 32. On that basis, BT shares are more expensive than AI chip leader Nvidia!

Do I sound totally negative about BT? I’m actually not, I’m cautiously optimistic. My reason is summed up by something CEO Allison Kirkby said with February’s Q3 update: “We remain on track for our financial outlook and guidance metrics for this year, our cash flow inflection to c.£2.0bn next year, and to c.£3.0bn by the end of the decade.“

Big debts and a high P/E valuation? Those might not matter much if BT can reach such impressive cash flow levels. The end-of-decade target is a full 80% above the £1.65bn recorded in 2025. I’ll definitely have my eyes focused on cash when we see 2026 FY results on 21 May.

Bottom line

So what’s my verdict? I confess I’m a bit torn. And it looks to me like we’re in a bit of a wait-and-see phase for BT shares. I could see BT as a potential long-term buy. But right now, I think investors should consider looking for clearer value elsewhere.

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A stable utility

First we have BT Group (LSE:BT.A). The stock is up 17% in the past three months, and 30% over a broader one-year time horizon. The Q3 update from February suggested broadband competition is easing, with customer losses coming in lower than feared. At the same time, its full-fibre rollout continued at pace, now passing over 21m premises. Investors were impressed by the strong take-up growth, and this could keep helping the stock outperform later this year.

BT’s cash flow has also been improving. In volatile markets (especially amid geopolitical tensions), that kind of predictable, infrastructure-backed cash generation becomes very attractive. Telecoms aren’t flashy, but they’re essential. After all, people don’t cancel broadband in a crisis!

The stock is holding up very well, and I believe it could continue to do so as people will see it as a defensive play. In uncertain conditions, investors tend to allocate funds to these companies with stable demand and dividend potential. Its yield of 3.79% isn’t the highest in the index, but is above the FTSE 100 average.

One risk is regulatory scrutiny. This is always something investors are concerned about as they have the power to materially impact any growth plans by putting roadblocks in the way.

Engineering profits

The second company doing well is Weir Group (LSE:WEIR). It’s up 47% in the last year and has been rallying so far in 2026 as well.

Interestingly, the share price dropped in March following full-year results. This came due to a guidance tweak lower for this year and higher spending on a new company-wide IT system. Even though these could be seen as risks going forward, there were plenty of positives to take away from them. For example, revenue was up 2%, with adjusted profit before tax up 4%.

We also need to factor in the indirect benefits from the ongoing commodity boom. Remember, Weir is a global engineering company focused on providing high-performance technology and services to the mining industry. I believe key themes such as the electrification push and AI build-out will continue to keep commodity prices high. This should help smooth out any market volatility in the share price as people are aware of the long-term demand trend.

Even though some were disappointed by the recent guidance, the company is still expecting further growth and margin expansion in 2026. This is supported by various factors, including operational improvements and its push into higher-margin software offerings. This increasingly diversified set of revenue streams should further make it a reliable company that people would do well to investigate further.

Overall, I think both stocks could be considered for portfolios aiming to manage volatility as we face uncertain times ahead.

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Take BT Group (LSE:BT.A) and Diageo (LSE:DGE). City analysts think these FTSE-listed stocks will rise by 50% or more over the next 12 months. So what are the chances of them taking off?

BT Group

Can BT’s share price surge 53% over the next year? That’s the view of one broker, who’s attached a 330p price target to the company. They’re expecting widescale restructuring, which includes cost-cutting and a move away from legacy services, to keep delivering strong returns.

But I’m not so sure. And neither are the vast majority of analysts rating BT shares. Those 14 currently rating the company have attached an average share price of 208.7p, down 3% from today’s levels.

I’m not surprised by their bearish position. Amid fierce competition and weak consumer spending BT’s still struggling to get sales firing. And with the Iran War raising inflationary pressures and hitting UK economic growth, its task is becoming increasingly difficult. Latest financials showed revenues down 4% in the three months to December.

Rising inflation creates another significant issue for the FTSE 100 stock. With the Bank of England now expected to hike interest rates — the market is pricing in two raises in 2026 — borrowing costs will increase. This is the same for all businesses, but the problem for BT is especially acute given the size of its debt pile.

At the end of 2025, its net debts were £20.9bn and rising.

I don’t think any of these issues are properly reflected in BT’s high valuation. The forward price-to-earnings (P/E) ratio of 14.4 times today sails above the 10-year average of 8.9.

My view is this may at least limit further price gains. If the conflict in the Middle East drags on, it could even cause a sharp drop in BT’s share price.

Diageo

Are things looking better at Diageo? After all, the company faces the same sales pressures as BT, and conditions could worsen if consumers tighten their belts still further. That’s not all — like other drinks manufacturers, volumes are under threat as people pursue healthier lifestyles and reduce alcohol intake.

Yet City analysts are confident the Guinness manufacturer’s shares can rebound from recent heavy weakness. The average share price target among 21 City analysts is £19.47, up 35% from today’s levels.

One forecaster even thinks Diageo’s share price can rise 67%, to £24.03.

While there are challenges, I’m also optimistic that Diageo can rebound as new CEO Dave Lewis’s recovery strategy begins. Steps like moving away from purely premium drinks, selling underperforming labels and stripping out costs could kickstart investor confidence and push the share price higher.

Diageo’s shares are also cheap enough to support a price rally. The forward P/E ratio of 12.6 times is miles below the 10-year average of 21-22. I’d suggest investors consider avoiding BT and take a close look at Diageo instead.

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