Image source: BT Group plc
2025’s proving to be a good year for the BT (LSE:BT.A) share price, with the UK’s leading telecommunications giant boosting its market-cap by over 20%, so far. Yet, if the analyst team at JPMorgan’s correct, this recent growth could be just the beginning.
The bank currently has a 286p share price target for BT, representing a 62% potential capital gain that might emerge in the next 12 months. If that proves to be accurate, it means investing £1,000 today would grow into a substantial £1,622 by this time next year. And that’s before factoring in the extra income from the stock’s tasty-looking 4.6% yield.
So what’s driving this ambitious forecast? And should investors be considering this business for their portfolios today?
Digging deeper
At the start of 2024, Allison Kirkby moved into the corner office as CEO to try and get the business back on track. Just over a year in and she’s delivered some noteworthy progress. It’s in this transitionary background that the analysts at JPMorgan have put their optimism.
In its 2025 fiscal year (ending in March), BT’s cost-saving initiatives are moving at a faster-than-anticipated rate. The company has already delivered £913m in annualised savings. And with upgrades and optimisations being rolled out across its entire network, energy consumption has also enjoyed a 4% drop paired with 10% lower repair volumes for its Openreach segment.
Lower expenses mean wider margins. And the improvements delivered to date have translated into a 12% jump in pre-tax profits. More encouragingly, the firm’s pension deficit has finally started shrinking, from £4.8bn to £4.1bn. There’s still a long way to go, but it’s undoubtedly a step in the right direction. And with free cash flow generation expected to reach £2bn by March 2027, more progress seems to be on the horizon.
In light of all this, it’s easy to understand why JPMorgan is bullish. However, not everyone is convinced that the current BT share price presents a bargain buying opportunity.
The bear case
Deutsche Bank seems to be taking a more cautious approach with this business, going so far as to issue a Sell recommendation. While margins and earnings are heading in the right direction, BT’s struggled to spark any significant revenue growth. In fact, its latest results showed sales falling by 2% year on year.
Deutsche is placing the blame on intense competition from alternative network providers that undercut pricing power. BT’s begun addressing this issue by improving the quality of its network and rolling out more fibre optic access across the country. And this move has helped deliver some improvement in the firm’s net promoter score, suggesting improved customer loyalty. But whether this can eventually evolve into top-line growth remains uncertain.
Overall, I think Deutsche is being a bit too pessimistic, given the progress Kirkby has delivered so far. Having said that, its concerns surrounding long-term growth are valid. So while I don’t think investors need to consider selling their shares, I wouldn’t consider putting BT on a Buy list either.
