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We’re one month into the 12 months and I’d by no means have guessed which FTSE 100 inventory could be main the cost in 2025.
It’s not final 12 months’s double-your-money winners British Airways proprietor Worldwide Consolidated Airways or progress monster Rolls-Royce, however African telecoms operator Airtel Africa (LSE: AAF).
The shares surged 27.1% in January. It swept to the highest of the 2025 leaderboard after posting a powerful set of outcomes on 30 January, whereas its second $100m share buyback added gasoline to the rally.
Somebody who had put £10,000 into Airtel Africa shares initially of the 12 months would now have £12,710. That’s a powerful return in just some weeks, however sufficient of that nonsense. At The Motley Idiot we see investing as a long-term course of, not a get-rich-quick sport.
So can the £5bn firm now construct on its stellar outcomes, or will profit-takers whittle the expansion away within the weeks forward.
What’s driving the Airtel Africa share worth surge?
Airtel Africa has been on my radar for some time, and Thursday’s (30 January) fab outcomes jogged my memory of its enormous potential. The corporate operates throughout 14 fast-growing African markets, the place demand for telecoms and cellular cash companies continues to develop.
Within the 9 months to 31 December, the group’s complete buyer base rose 7.9% to 163.1m, whereas information buyer numbers surged 13.8%.
Income jumped 20.4% in fixed forex phrases, with cellular cash income alone rising 29.6%. Revenue after tax skyrocketed from simply $2m to $248m 12 months on 12 months.
CEO Sunil Taldar was bullish about Airtel’s prospects, highlighting the corporate’s “deal with pace and high quality execution”.
Not all of the indicators are optimistic. Forex devaluations stay a problem. Notably the devaluation of the Nigerian naira, which hit the group’s revenues as soon as transformed again into sterling phrases. This stays a problem, with Thursday’s outcomes displaying income declined by 5.8%, largely because of the embattled naira. They’ve been indicators of African forex stabilisation recently.
Can the FTSE 100 group proceed to fly?
The shares are up 27.1% this 12 months and 97% over 5 years, albeit with loads of volatility in between. So is that this the correct time to purchase?
It’s at all times tough investing after a sudden surge, as profit-taking can result in pullbacks. Airtel Africa nonetheless seems to be attractively valued on a ahead price-to-earnings ratio of simply 10.6 for the monetary 12 months beginning in April 2025. Nevertheless, that’s primarily based on gross sales rising nearly 200% over the 12 months forward. Any earnings miss will likely be punished.
The corporate additionally gives a good trailing dividend yield of three.3%, including an earnings aspect to its enchantment. And its ongoing enlargement and rising smartphone adoption in Africa does create a compelling long-term progress story.
However dangers stay. Forex fluctuations may proceed to hit reported earnings, however internet debt is my largest fear. This jumped from $3.28bn to $5.27bn 12 months on 12 months. That have to be set in opposition to positives comparable to its rising buyer base, bettering margins and share buybacks.
Given current efficiency and strategic investments, I’m conserving a better eye on this rising star. However I gained’t purchase it in February. Shares so usually retreat after a dramatic leap, and this one nonetheless has dangers. It’s not the correct name for me right this moment.
