BT Group (LSE:BT.A) shares are off to a good start in 2025. They’ve climbed by double digits since early January and almost 50% over the last 12 months. That means a £5,000 investment back in March 2024 is now worth around £7,500!
It’s a welcome trend given the lacklustre performance Britain’s telecommunications giant has delivered in recent years. But can the stock continue to climb from here? And if so, how much money could investors make over the next 12 months?
Cost-cutting to profitability
With a pretty massive pile of debt and pension obligations, BT’s CEO Allison Kirkby has been busy finding ways to optimise operations. And to her credit, some significant improvements have already been delivered. That means £3bn of cost savings and a further £3bn on track for 2029. Looking at the latest trading update, shareholders are understandably pleased to see even more progress being made in improving operational efficiency.
Electricity consumption across BT’s network fell by 3%, with a similar drop in labour costs. But more substantially, its Openreach repair volumes fell by 11% as the quality of the firm’s infrastructure improved.
At the same time, the company added yet another million premises to its FTTP (fibre to the premises) portfolio during its most recent quarter. This brought the total to 17m. That marks the fourth consecutive period of at least 1m new additions. And it puts BT firmly on track to hit its 25m total premises target by December 2026. That’s particularly encouraging since most of BT’s competitors are stealing customers where FTTP hasn’t been installed yet.
There’s still plenty of work ahead, and with most customers still being upgraded from broadband to fibre, revenue growth remains elusive. However, incremental improvements to profit margins have started pushing underlying earnings back in the right direction, albeit by 1%.
Where could the BT share price be in 1 year?
Compared to a year ago, the general consensus from analysts seems to be improving, with 13 now rating the stock as a Buy versus 11 last year. And in terms of share price forecast, the most optimistic outlook puts the BT share price at a whopping 299p by this time next year.
If this projection proves accurate, it would mean that investing £5,000 today could grow to £9,618! Of course, not everyone agrees with some projecting the stock could actually fall to as low as 110p. Under this scenario, a £5,000 investment would actually shrink to £3,540.
The success or failure of this stock over the next 12 months continues to be tied to the restoration of free cash flow and the reduction of the debt burden. For reference, there’s about £23.6bn of outstanding debts & equivalents . This is paired with a £4.3bn pension deficit based on the latest figures, versus only £2.7bn in cash & equivalents on the balance sheet.
If Kirkby’s strategy continues to yield fruit, I think there’s cause to be optimistic about BT’s future. But personally, I’d like to see more progress made in reducing leverage before putting any money into these shares. After all, this isn’t the first time leadership has tried to turn things around.
This post was originally published on Motley Fool
