Up 26%, can the BT share price really push higher still?

For me, the rising BT (LSE:BT.A) share price represents something of a missed opportunity. I had watched it closely around £1, but didn’t make the investment I intended. The stock has since jumped several times.

Shares in the FTSE 100 company are now up 26% over the past 12 months, and up 35% over the past six months. But can the share price push higher? Well, the evidence below suggests that it can.

The future’s bright(er)

”The future’s bright, the future’s Orange” was a slogan by another telecoms company — now EE — but I think it’s fair to say that the future is looking increasingly bright at BT.

For years, the company’s prospects have been held back by uncertainty around the vast costs of laying down fibre to the premises (FTTP) across Britain.

In fact, it costs around £85m to roll out FTTP to 100,000 households. And recent reports suggest the company will aim to reach another 10m homes — inferring that most of its spending on fibre infrastructure is in the past.

Having passed peak capital expenditure, management has now promised £3bn of savings annually through to the end of the decade. This has provided investors with a lot more certainty.

Earnings will improve

Currently, analysts are forecasting BT to earn 14.3p per share in financial year 2025 (this year) and then 15.3p in both 2026 and 2027. Investors will hope that this is part of an improving earnings trajectory that will see continued growth through to the end of the decade. With costs set to fall dramatically, it’s highly possible.

Based on the current price and these forecasts, the telecoms company is trading at 9.8 times forward earnings and 9.1 times earnings for 2026 and 2027. That’s a figure below the index average, and is complemented by a 5.7% dividend yield.

The dividend is actually expected to rise from 8.1p this year to 8.3p in 2026 and 2027. That’s a good sign.

Analysts are backing BT

Stocks are covered by analysts from major financial institutions who issue ‘buy’, ‘sell’, or ‘hold’ ratings and provide price targets — their view on fair value.

Despite the stock rising, analysts are continuing to back BT, with an average share price target of £2.08, inferring that the stock is undervalued by 43.9%.

However, we must recognise that three analysts — out of 17 — hold negative views on the stock and actually believe it’s overvalued.

Generally, this reflects the fact that huge spending on fibre and the resulting net debt position — approximately £20bn — represents a considerable risk.

Undoubtedly this debt position makes BT vulnerable to economic shocks, and I’d suggest it’s the driving force behind any ‘bearish’ opinions.

Labour’s impact

Finally, while I’m positive on BT and its prospects over the long run, I believe that the inflationary impact of the budget may slow interest rate cuts. This is potentially an issue for BT, a company that carries lots of debt.