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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 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 yr 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 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 worth 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 cell cash companies continues to develop.
Within the 9 months to 31 December, the group’s whole buyer base rose 7.9% to 163.1m, whereas information buyer numbers surged 13.8%.
Income jumped 20.4% in fixed forex phrases, with cell 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 optimistic. Foreign money 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 exhibiting income declined by 5.8%, largely because of the embattled naira. They’ve been indicators of African forex stabilisation currently.
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 best 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 yr beginning in April 2025. Nevertheless, that’s based mostly on gross sales rising nearly 200% over the yr forward. Any earnings miss shall be punished.
The corporate additionally gives an honest trailing dividend yield of three.3%, including an revenue factor to its attraction. And its ongoing growth and rising smartphone adoption in Africa does create a compelling long-term development story.
However dangers stay. Foreign money 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 towards positives resembling its rising buyer base, enhancing 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 best name for me in the present day.
