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Where will the BT share price be at the end of 2024?

Image Source: BT Group Plc

Making predictions about Bt (LSE:BT.A) share price is difficult.

However, there is considerable debate among analysts as to how much FTSE 100 The stock should be priced with the company currently going through a transition period as spending on Fiber to the Premise (FTTP) slows.

Long-term performance has not been strong. And as someone who has been watching the communications giant for some time, I can imagine how disappointing its share price performance has been for shareholders.

So, where might the share price be at the end of the year?

Positive symptoms

He has outperformed his peers over the past month. Despite reporting a 31 percent drop in annual profit for the year to March 31, management impressed shareholders with a cost-saving plan.

According to management, BT Group is a “Disposition pointAfter the highest capital expenditure of its full fiber broadband rollout.

This is great news for all of us who were worried that costs might rise.

CEO Alison Kirkby highlighted that BT had achieved its £3bn cost and service transformation program a year ahead of schedule.

Additionally, it announced a further £3bn of annual cost savings by the financial year ending March 2029.

Are costs still an issue?

BT’s medium-term earnings outlook has actually worsened since Kirkby’s announcement. Analysts now expect earnings per share (EPS) of 15.55p in 2024, 13.73p in 2025 and 14.72p in 2026. As a result, this suggests the stock is trading at around 8.3 times forward earnings.

I would suggest that this earnings revision reflects the company’s worse-than-expected performance in 2023 and an acceptance that, in the medium term at least, FTTP rollout will remain cumbersome.

Estimates suggest BT still plans to roll out FTTP to a further 11m to 13m homes. BT said in October that it had already reached 11.85m premises, and Kirkby aimed to reach 25m by December 2026.

According to Kirkby, an interesting note from the earnings call was that BT’s rollout cost per base is less than £300. I previously heard it was £850 per base.

The new figures suggest the rest of the rollout will cost just £3.9bn – for 13m homes. It’s much less than I thought.

However, Kirkby also suggested that capital spending would not fall until early 2027. Only then will we start to see how successful BT’s FTTP rollout has been.

It is also important to highlight that FTTP is much easier to maintain than traditional copper cabling. This is expected to help reduce costs in the long run.

Finding the right price

As I hope the above suggests, understanding how much BT shares should be worth is really difficult. This is simply because the multi-billion pound rollout of FTTP has yet to be reflected in earnings.

The fair value currently sits around 191p, according to a consensus of analysts following the stock. This is a significant premium of 48% over the current share price.

Although there are many variables, including the impact of further quarterly announcements, I would expect BT shares to continue to trade at a discount to the share price target.

If I had to put a figure on it, I would expect to see the shares trading around the 135p-145p mark by the end of the year (I could be wrong of course). Shares appear to be undervalued, but investors are unlikely to pull out of the stock before earnings move in the right direction.

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