Prediction: see where analysts think the BP share price will go next
There are plenty of reasons to be wary about the BP (LSE: BP) share price. This is a company that lost its way, making a reluctant push into renewables before rowing back with an almost audible sigh of relief.
Climate change has made oil and gas stocks politically charged, yet demand for fossil fuels still has a long way to run. That leaves BP walking a fine line between investing in the future and maximising todayâs profits.
The shares jumped after Russiaâs invasion of Ukraine in 2022 sent energy prices soaring, but retreated as Europe found other supply routes. They remain tied to every twist in geopolitics, global oil demand, production levels, inventory reports, and OPEC machinations. And that’s not likely to change.
Stock valuation puzzle
Over the last 12 months, the BP share price has risen just over 3%, and itâs still down 18% over two years. Despite that, the price-to-earnings (P/E) ratio suggests it’s massively overpriced, standing at an alarming 242. Thatâs distorted by a 97% drop in 2024 earnings. On a forward basis, the P/E looks more modest at 14.4.
Investors are also hoping CEO Murray Auchincloss can turn this floundering tanker around. Recent events have helped investor sentiment. These include drone strikes on Russian refineries that threatened supply, as well as BPâs biggest oil discovery in 25 years off Brazil’s shore.
Results snapshot
Second-quarter results, published on 5 August, offered some respite. While underlying replacement cost profit, a key earnings metric, fell almost 15% to $2.35bn, it still comfortably beat analyst forecasts of $1.81bn. The quarterly dividend was hiked 4% to 8.32 cents a share, while quarterly share buybacks continued at $750m.
Net debt is still close to $30bn, which isnât ideal, but with annual revenues pushing $190bn last year, I’m not going to lose sleep over that. Auchincloss is looking to whittle that down, partly through disposals.
Upbeat analyst outlook
While the outlook is uncertain and should remain so, investors can look forward to dividends. The forecast yield is a pretty meaty 5.7% for 2025, rising to 5.91% in 2026.
Experts are upbeat about the shares. Consensus suggests the BP share price could climb 11.1% over the next year to 472p. That would deliver a potential total return of close to 16.8%, including the dividend. It hardly needs saying that forecasts cannot exactly be relied upon. Every stock involves risk. That’s the price we pay for potentially higher rewards.
What encourages me most is that out of 30 analysts, 13 currently rate BP a Buy, 16 a Hold, and only one says Sell. Given its strong yield, ongoing buybacks, and recent oil discovery, I think investors might consider buying. That is provided theyâre comfortable with the volatility that comes with energy stocks.
Long-term investors should remember that success lies in sticking with a strategy, reinvesting dividends, and letting compound returns do the heavy lifting. Itâs also worth brushing up on how to value shares to help make sense of oil majors when earnings swing wildly. As they will surely happen here. BP is no longer than no-brainer buy of yore, but I still think it’s pretty difficult to ignore. As is the dividend.
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More reading
- Are BP shares fairly priced in a world of increasing instability and deglobalisation?
- See what an investor would have after putting £10k into BP shares 3 months ago
- The BP share price continues its recovery as the oil giant signs a major drilling deal with Egypt
- Here’s why the BP share price could soon come under pressure (but I’m not selling up)
- Forecast annual earnings growth of 28%, 52% undervalued and with a projected 6.3% dividend yield, are BP shares set to soar?
Harvey Jones has positions in Bp P.l.c. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
