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According to AJ Bell, loads of UK investors have been promoting BP (LSE:BP) shares within the final month. And it’s simple sufficient to see why.
Oil costs have been hovering, and investors are banking some income on the belief the restoration is fragile. Maybe they’re proper — these oil costs have reversed on Friday (17 April). So let’s dig deeper.
Oil costs
Over the final three months, Brent crude has climbed by round 37%. And that’s pushed BP shares up 22%.
Whether or not that’s justified in the end is dependent upon the affect on the corporate’s earnings. So what are analysts saying?
Expectations for this yr have greater than doubled. And the affect is anticipated to proceed into 2027 and 2028.
| Jan 2026 | April 2026 | |||
| Year | EPS | Present Value | EPS | Present Value |
| 2026 | £0.33 | £0.30 | £1.08 | £0.98 |
| 2027 | £0.38 | £0.31 | £0.48 | £0.40 |
| 2028 | £0.41 | £0.31 | £0.46 | £0.35 |
| 2029 | £0.42 | £0.29 | £0.42 | £0.29 |
| Total Present Value | £1.21 | £2.01 | ||
A discounted cash flow (DCF) analysis tells us what this implies for the inventory. A 9% goal return implies an 80p per share improve.
With the refill 103p for the reason that begin of the yr, some of the promoting arguably is sensible. But that’s not the one factor that issues.
Intrinsic worth
Analysts is perhaps upgrading the inventory. But the boosted earnings to 2029 solely account for 37% of the agency’s present share value.
In phrases of enterprise value (EV) – which incorporates debt – the affect is smaller nonetheless. BP’s EV per share is extra like £8.01.
On that foundation, what issues most is what occurs after 2029. An additional 80p per share in current worth isn’t an enormous deal.
In reality, earnings over the following few years matter lower than investors may assume. Even with the latest analyst upgrades.
Around 75% of the current worth has to come from what occurs after 2029. And that’s the factor to concentrate on.
Long time period
By my calculations, BP wants to common round 34p in earnings per share over time to generate a 9% return. Is that sensible?
The agency hasn’t managed this within the final 10 years. There are, nevertheless, causes to be extra optimistic going ahead.
Investments in wind and photo voltaic technology have weighed on earnings. On prime of this, they’ve left the agency with extra debt.
BP, nevertheless, is specializing in strengthening its balance sheet. And the windfall from unstable oil costs ought to assist with this.
Furthermore, the brand new CEO is refocusing the corporate on oil and fuel. So the identical enterprise errors of some years in the past are much less possible to be repeated.
Time to sell?
Investors promoting BP shares are clearly trying forward. Oil costs have already began falling and that makes the inventory weak.
That’s a threat. But the latest volatility ought to give earnings a lift that impacts the agency’s intrinsic worth.
My estimate of that is that it’s price round 80p per share. On prime of this, there are additionally lasting penalties to take into account.
An improved steadiness sheet and a greater strategic focus ought to assist long-term income. And these are causes for positivity.
Investors who’ve owned the inventory for the reason that begin of the yr have executed effectively. I’m unsure they want to take into consideration promoting but, however I don’t see it as one to take into account shopping for both.
