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We’re one month into the yr and I’d by no means have guessed which FTSE 100 inventory could be main the cost in 2025.
It’s not final yr’s double-your-money winners British Airways proprietor Worldwide Consolidated Airways or development 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 robust set of outcomes on 30 January, whereas its second $100m share buyback added gas to the rally.
Somebody who had put £10,000 into Airtel Africa shares at first of the yr would now have £12,710. That’s a powerful return in only a few weeks, however sufficient of that nonsense. At The Motley Idiot we see investing as a long-term course of, not a get-rich-quick recreation.
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 value surge?
Airtel Africa has been on my radar for some time, and Thursday’s (30 January) fab outcomes jogged my memory of its large potential. The corporate operates throughout 14 fast-growing African markets, the place demand for telecoms and cellular cash providers 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 foreign money phrases, with cellular cash income alone rising 29.6%. Revenue after tax skyrocketed from simply $2m to $248m yr on yr.
CEO Sunil Taldar was bullish about Airtel’s prospects, highlighting the corporate’s “focus on speed and quality execution”.
Not all of the alerts are constructive. Forex devaluations stay a difficulty. Notably the devaluation of the Nigerian naira, which hit the group’s revenues as soon as transformed again into sterling phrases. This stays a difficulty, with Thursday’s outcomes exhibiting income declined by 5.8%, largely due to the embattled naira. They’ve been indicators of African foreign money stabilisation recently.
Can the FTSE 100 group proceed to fly?
The shares are up 27.1% this yr and 97% over 5 years, albeit with loads of volatility in between. So is that this the precise time to purchase?
It’s all the time difficult investing after a sudden surge, as profit-taking can result in pullbacks. Airtel Africa nonetheless seems attractively valued on a ahead price-to-earnings ratio of simply 10.6 for the monetary yr beginning in April 2025. Nevertheless, that’s primarily based on gross sales rising nearly 200% over the yr forward. Any earnings miss shall be punished.
The corporate additionally presents a good trailing dividend yield of three.3%, including an earnings factor to its enchantment. And its ongoing enlargement and rising smartphone adoption in Africa does create a compelling long-term development story.
However dangers stay. Forex fluctuations might proceed to hit reported earnings, however internet debt is my greatest fear. This jumped from $3.28bn to $5.27bn yr on yr. That have to be set in opposition to positives equivalent to its rising buyer base, enhancing margins and share buybacks.
Given current efficiency and strategic investments, I’m maintaining a more in-depth eye on this rising star. However I gained’t purchase it in February. Shares so typically retreat after a dramatic leap, and this one nonetheless has dangers. It’s not the precise name for me at this time.
