The BT (LSE:BT.A) share price has been in the doldrums for more than a decade. Today, each share is worth around 125p.
But if the world’s largest investment bank is correct? There could be a wonderful surprise in 2024 for holders of the FTSE 100 stalwart.
If the prediction comes true, a £10,000 investment in BT today could be worth £23,200, not including any gains from its 6.5% dividend yield.
Should you invest £1,000 in BT right now?
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Double my money?
The BT share price peaked at 488p way back in 2015. That’s long before any of us had heard of Covid, Bitcoin or even Liz Truss. So could it really rise more than 130% next year?
In early December, equity analysts at JP Morgan made investors do a double-take with a hugely bullish BT share price target of 290p.
Those same analysts wrote in 2022 that this year, 2023, would either “make or break the buy case” for telecoms companies.
It said catalysts would include retail price hikes in line with inflation.
And BT duly pushed up its prices on TV and broadband contracts by a whopping 14.4%. That brought predictable anger from millions of customers already dealing with a cost of living crisis.
That same move has come back to haunt the telecoms giant. BT shares sold off heavily this week as the regulator Ofcom proposed a ban on inflation-linked price rises for customers still in contract.
What investors get
BT does pay its shareholders a 6.5% dividend yield — the 12th largest on the FTSE 100. But I have a hard time predicting drastic share price growth.
The company has guided the market that net profits of £1.9bn in 2023 will fall to £1.81bn in both 2024 and 2025.
Dividends per share will take a hit, from 7.7p this year, to 7.48p and 7.5p over the next two years. Earnings per share may also fall, it said.
Fibre wars
Something about a 290p price target for 2024 doesn’t seem to add up. Especially when we consider potential growth markets for BT. In 2022 the company dramatically slowed the pace of its fibre broadband rollout to make cost savings.
Now BT faces its stiffest competition from alternative, independent network providers like CityFibre. Overall full-fibre broadband penetration in the UK is only at 50%. And CityFibre already has a fully-financed £4bn plan to install full fibre to 8 million homes. It currently provides the fastest wholesale broadband services with speeds up to 2.5Gbps.
What to learn
When analysts at JP Morgan speak, the market tends to listen. But while they suggest the BT share price will spike in 2024, the drivers for that move seem shaky at best.
Their bullish 132% price gain prediction factors in further BT contract price increases in 2024. That now seems politically untenable given the UK regulator’s ire.
Falling interest rates would cut debt payments to aid free cash flow too, its reporting said. But that’s true for most companies, and not a specific buy signal for BT.
Analysts aren’t always right. They analyse, they pore through data, they make predictions. But it’s highly unlikely any would lose their job on the back of a poor price projection.
I still say there are far better bets to double my money in 2024.
