BP Shares Set for a Massive Bull Run?
According to an analysis by Yahoo Finance UK, BP (LSE: BP) shares are experiencing a significant surge, with the company’s stock price following the recent rise in oil prices. This uptrend is attributed to the ongoing conflict between Israel and Iran, which has led to an increase in Brent Crude prices, surpassing $74 per barrel. To put this into perspective, at the start of the month, the price was closer to $60, representing a rise of over 20% in less than a fortnight.
The BP share price has also seen a notable increase, rising by around 3% on the day, making it the second-best performer in the FTSE 100 index, after defence giant BAE Systems. Over the past week, the company’s shares have risen by 6%, although they are still down by 18% over the past 12 months. As noted by the Yahoo Finance UK analyst, the oil price has been under pressure, but now analysts are revising their forecasts, with Saxo predicting that it could reach $80 per barrel. If Iran were to close the Straits of Hormuz, a critical bottleneck for oil tankers, the price could potentially rise even further.
However, the question remains as to whether the conflict will escalate. As the Yahoo Finance UK article points out, “nobody knows.” The analyst suggests that investors should look beyond the current noise and consider the longer-term implications. In their view, BP is no longer the core FTSE 100 holding it once was, as the company has been forced to rethink its strategy in response to climate change. The article highlights that the world has become less energy-intensive, with a decline in oil consumption, and the increasing adoption of renewable energy sources.
Furthermore, the Yahoo Finance UK analyst notes that there are operational risks associated with oil production, such as the potential for disasters like the 2010 Gulf of Mexico blowout. Despite these challenges, the analyst has started building a position in BP shares, citing a generous trailing yield of 6.2%. They expect the yield to rise to 6.39% this year and 6.59% in 2026, making it an attractive proposition for income-seeking investors.
On 29 April, BP reported underlying replacement cost profits of $1.38bn for the first quarter, which was below forecasts and significantly lower than the $2.72bn recorded in the same period last year. However, this still represented an improvement on the previous quarter’s $1.17bn. The company’s net debt has risen from $24.02bn to $26.97bn, which is a concern, according to broker Jefferies. They have downgraded the stock, citing the potential for BP to have to choose between hitting debt-reduction targets, scaling back share buybacks, or slowing upstream investment.
As the Yahoo Finance UK article notes, BP is also looking to raise cash to pay down debt, which could become easier if crude prices remain elevated. Analyst consensus currently suggests that the share price could rise to 433p over the next 12 months, representing a gain of 11% from current levels, rising to a total return of 17% with dividends included.
In conclusion, as reported by Yahoo Finance UK, buying BP shares is a cyclical business in a cyclical market, and the time to buy is when the stock is under pressure, as it has been recently. While the company’s shares can be volatile, the current dividend yield and potential for long-term growth make it a proposition worth considering for investors with a long-term view. As the Yahoo Finance UK analyst notes, “when BP flies, it can really fly,” but investors should be prepared for a potentially bumpy ride.
The information in this article is based on data from Yahoo Finance UK.
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