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The latest BT Group (LSE: BT.A) share price surge started in May 2024, when the telecoms giant announced the turnaround point in its fibre broadband rollout.
Capital expenditure should start to fall, revenue and profits should rise, and shareholders should break into happy smiles as they work out what to do with their rising dividend cash.
Well, that’s the idea. And the share price has responded well. Since then we’re looking at an increase of more than 80%, with a 37% gain in the past 12 months.
More to come?
The improving outlook has made most broker forecasts more optimistic than they’ve been for years. They predict a 60% rise in earnings per share between 2024 and 2027.
The prospective dividend yield stands at around 4.2% now. It was suspended and then rebased to half its previous levels in the Covid years. And after that, I’d say it’s looking sustainable again.
And if that doesn’t make BT shares look attractive enough, broker price targets might make the difference. The top of the target range stands at 299p. That’s a whopping 56% ahead of the price at the time of writing (27 June).
Let’s be cautious
Admittedly that’s the most optimistic prediction I could find. But only this week, Berenberg raised its price target to 240p. The private bank — founded in 1590, so there’s long term for you — sees “defensive growth.” It also suggests there could be a sharp dividend rise in 2027, as the end of broadband rollout expense should improve cash flow.
That 240p is 25% ahead of BT’s share price today.
Morgan Stanley has also recently raised its price target for BT stock. Previously set at 225p, the global financial services firm has raised its sights to the same 240p.
But the real caution comes from the range of price predictions. Those two are in the bullish end of the range, but the average is only a few pennies above today. And there’s a low-end level of just 118p, for a 39% fall.
What do valuations say?
To get a feel for who might be right, we need to turn to BT’s stock valuation. And that’s where debt makes things tricky. Net debt reached £19.8bn in the 2025 fiscal year, a bit more than the company’s market cap. Anyone who buys today is effectively putting only around half their money into BT’s actual business
We’re looking at a forecast price-to-earnings (P/E) ratio of about 11 based on 2028 forecasts. And if it wasn’t for the debt, I might see that as screaming cheap.
But adjusting for the debt, we see an effective P/E valuation for the business itself of about twice that. Perhaps not such an obvious bargain. It is, however, possibly closer to a fair valuation than I think I’ve seen for a long time.
Aim for the targets?
Because of the debt and uncertainty surrounding valuation, I won’t buy BT shares. But those who favour these broker target upgrades could do well to consider BT for long-term income.
