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How much further can the BP share price rise?

Is it too late to buy BP shares?

BP logo Source: Bloomberg

Is BP still a good investment?

With the BP share price having risen by around 200% from its October 2020 low, boosted by surging oil and gas prices due to the nearly one-year old invasion of Ukraine by Russia, is it too late to jump on the bandwagon?

In our earning’s preview from a week ago we said that “a rise above 504.40p would engage the 508.45p January 2020 high, followed by the October and November 2019 peaks at 518.50p to 521.50p.”

All of these levels have since been exceeded with the BP share price now trading at levels last seen in April 2019, at 563 pence, up 16.5% year-to-date, on the back of another solid quarter profit.

Although BP’s results missed analysts’ expectations on 7 February, the oil and gas producer reported record annual profits of $27.6bn (£23bn) for 2022, double the previous year's figure, as it pushed back on plans to reduce the amount of oil and gas it produces by 2030.

The oil giant’s pledged increase of an already solid dividend yield, large $2.75bn share buyback programme and upgraded medium-to-long-term guidance, makes its shares an interesting proposition for those interested in passive income and prospective medium-term growth, even at its current share price.

BP is anticipating EBITDA of $46bn to $49bn (from $38bn) in 2025, and $51bn to $56bn (from $39bn to $46bn) in 2030, based on the assumption that oil continues to trade at a minimum of $70 per barrel. It is currently trading around the $78.50 mark.

How to trade BP following its bumper results

According to Refinitiv - just as before the company’s earnings last week - six analysts still rate BP as a ‘strong buy’, twelve as a ‘buy’ and eight as a ‘hold’ but with an increased median price target of 570p instead of 550p previously, only about 1% above current levels (as of 15 February 2023).

Refinitiv analyst Source: Refinitiv
Refinitiv analyst Source: Refinitiv

Despite BP’s share price having risen significantly over the past couple of years, how does the world’s 20th largest energy company, behind Shell in ninth and Exxon Mobil in fourth, fare versus its larger rivals year-to-date?

Google Finance energy companies share price comparison

BP share price comparison Google finance Source: Google Finance
BP share price comparison Google finance Source: Google Finance

As can be seen from the above chart, BP’s share price has risen by over 16.5% year-to-date, by nearly twice as much as Exxon Mobile’s and by more than twice when compared to Shell’s share price.

Instead of buying BP shares right away, it might therefore be prudent to buy these on a retracement lower or when a short-term consolidation phase can be seen.

What does the technical outlook say about the BP share price?

When analysing a weekly BP chart going back to 2020, it becomes clear that the share is trading within a clearly defined uptrend and has broken out of an ascending triangle when its earnings were published.

Weekly BP chart

Weekly BP chart Source: Tradingview
Weekly BP chart Source: Tradingview

The April 2019 high at 583.40p represents the next technical upside target, followed by the October 2018 peak at 603.60p.

On the daily chart a loss of upside momentum and volatility with diminishing daily volume points to a possible minor retracement lower soon being seen which could be used to initiate or add to existing long positions.

Daily BP chart

Daily BP chart Source: Tradingview
Daily BP chart Source: Tradingview

Potential slips may find support around the September 2019 high at 532.60p. Below it further minor support can be spotted at the November 2019 high at 521.50p and the January 2020 high at 508.40p.

While the last reaction low, made on 23 January at 468.60p underpins, the strong medium-term uptrend remains intact.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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