Last Update 27 Oct 25

Fair value Increased 0.34%

Analysts have modestly increased their price targets for BP, citing improving profit margins and positive sector dynamics. Recent updates reflect a rise from £4.58 to £4.59 and from $36 to $40, according to current street research.

Analyst Commentary

Analyst opinions on BP reflect a mix of optimism about the company's strategic positioning and ongoing caution around macroeconomic headwinds. Several price target upgrades and rating improvements have taken place as firms reassess BP’s relative value compared to both European and U.S. peers.

Bullish Takeaways

Bullish analysts note BP continues to trade at a notable discount to many U.S. and European energy majors. This presents an opportunity for valuation catch-up if execution improves.
Rising price targets reflect confidence in BP's ability to return capital to shareholders and sustain dividend growth, particularly given sector-wide focus on capital discipline.
Recent discoveries and successful upstream developments have the potential to enhance BP’s growth profile. There are positive expectations surrounding reserve replacement and resource depth.
Cost reduction initiatives and operational strength, especially in refining and trading, are seen as underpinning resilient financial performance and providing a buffer against near-term market softness.

Bearish Takeaways

Bearish analysts raise concerns about BP’s high leverage relative to peers. They warn that the company could find it difficult to reduce leverage in a weaker oil price environment.
There is skepticism regarding the valuation discount, with some suggesting it may not be significant enough to prompt aggressive investor rotation into BP shares.
Ongoing soft demand indicators and macroeconomic uncertainty are cited as risks for oil and energy names broadly. These factors could limit near-term upside for BP.
Despite media speculation about potential mergers and acquisitions, some analysts do not view BP as a likely takeover target at current valuation levels.

What's in the News

OPEC is maintaining its oil demand forecasts and expects global oil demand to grow by 1.3 million barrels per day this year and 1.38 million barrels per day next year. This outlook comes despite ongoing fiscal and trade uncertainties (The Wall Street Journal).
OPEC+ has agreed to increase oil output by 137,000 barrels per day in October and again in November. This move partially reverses previous voluntary cuts amid concerns of a supply glut and lower prices (The Wall Street Journal, The New York Times).
Wells Fargo initiated coverage of BP with an Equal Weight rating and a $37 price target. The firm noted sector-wide bearishness on oil and energy names but identified opportunities based on capital return strategies (Wells Fargo).
BP announced a new oil and gas discovery at the Bumerangue prospect offshore Brazil. This marks its tenth discovery of 2025 to date and supports its upstream production growth plans (Company Announcement).
BP declared an interim dividend of 8.320 cents per ordinary share for Q2 2025, scheduled to be paid in September 2025 (Company Announcement).

Valuation Changes

Fair Value Estimate has increased slightly from £4.58 to £4.59. This reflects modest analyst optimism in BP’s fundamentals.
Discount Rate has decreased marginally from 8.23% to 8.19%, which suggests a slightly lower risk premium applied to BP’s projected cash flows.
Revenue Growth projections have fallen noticeably, dropping from 4.50% to 3.48% as expectations for top-line expansion are tempered.
Net Profit Margin has improved from 4.48% to 4.60%, indicating an expectation for better profitability.
Future P/E Ratio is nearly unchanged, rising faintly from 11.30x to 11.34x. This signals broadly stable valuation expectations relative to earnings.

Focused project execution, cost reduction, and technological innovation are set to enhance BP's margins and cash flow while positioning it for persistent global energy demand growth.
Strategic asset optimization and strong trading performance support stable, high-margin earnings and resilience amid sector and regulatory shifts.
Ongoing capital misallocation, portfolio complexity, and operational weaknesses threaten BP's progress on energy transition, efficiency gains, and long-term profitability.

Catalysts

About BP

An integrated energy company, provides carbon products and services.What are the underlying business or industry changes driving this perspective?

The ramp-up of major upstream projects, breakthrough exploration successes in Brazil, West Africa, and other regions, and an ongoing focus on high-return organic growth provide BP with the ability to capture persistent global energy demand growth-particularly from emerging markets-supporting visible revenue and earnings expansion.
An accelerated and data-driven structural cost reduction program, enhanced by the use of AI, digitization, and supply chain optimization, is expected to materially improve BP's operating margins and free cash flow, positioning the company to benefit from technological advancements that reward scaled, efficient industry players.
Portfolio high-grading and disciplined capital allocation-via active divestment of lower-quality or stranded assets and focus on best-in-class project returns-will streamline BP's asset base and support more stable, higher-margin earnings as carbon pricing and ESG pressures increase, consolidating the position of large incumbents.
Superior performance in integrated trading (oil, gas, LNG) and downstream operations, including leveraging increasingly tight commodity and product markets, allows BP to maximize margin capture amid ongoing sector underinvestment, providing resilient ancillary income streams and diversification from core production.
Sustained growth in U.S. upstream operations (including BPX Energy and Gulf of Mexico), combined with ongoing U.S. policy support and favorable tax frameworks, positions BP to tap into scalable, long-cycle projects with attractive capital returns, underpinning long-term improvements in profitability and cash generation.

BP Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming BP's revenue will decrease by 2.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 0.3% today to 5.2% in 3 years time.
Analysts expect earnings to reach $8.9 billion (and earnings per share of $0.61) by about September 2028, up from $562.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $10.7 billion in earnings, and the most bearish expecting $6.5 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.6x on those 2028 earnings, down from 157.9x today. This future PE is greater than the current PE for the GB Oil and Gas industry at 11.5x.
Analysts expect the number of shares outstanding to decline by 4.14% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.34%, as per the Simply Wall St company report.

BP Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The recent impairments totaling $1.2 billion-including write-downs related to hydrogen, biofuels in Australia, and lingering issues in gas and low carbon-highlight continuing risks of capital misallocation and underperformance in new energy segments, which could negatively affect EPS and asset values.
BP's divestment and portfolio review process, including uncertainty around the Castrol disposal and potentially complex lease obligations tied to future large projects (like Bumerangue in Brazil), could lead to lumpy cash flows, increased financing needs, or mismatched capital allocation that risks constraining free cash flow and future earnings.
Tight diesel margins and underperformance in certain downstream segments (like TravelCenters of America) reveal areas of operational weakness and pricing pressure, which may dampen margin improvement targets if market conditions do not recover.
Structural cost reduction efforts are partly offset by growth in underlying organizational expenses (including inflation, increased production, and acquisitions), raising execution risk that headline savings may not fully translate into improved net margins or bottom-line growth, especially if inflation persists.
The heavy strategic focus and capex on upstream oil and gas development (ten major discoveries and multiple startups) may contradict long-term energy transition trends, exposing BP to long-term oil demand risks, evolving carbon regulations, technological obsolescence, and potentially stranded asset write-downs-threatening both top-line revenue and long-term profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of £4.438 for BP based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £5.2, and the most bearish reporting a price target of just £3.82.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $172.2 billion, earnings will come to $8.9 billion, and it would be trading on a PE ratio of 11.6x, assuming you use a discount rate of 8.3%.
Given the current share price of £4.27, the analyst price target of £4.44 is 3.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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