Does BT’s share price offer upside potential?
It’s been a ‘year of two halves’ for the BT share price (LON: BT.A). Having surged from under 140p at the start of the year to trade in excess of 200p by June, the FTSE 100 telecoms company’s stock price has declined by around 20% to its current level of 160p.
As has been the case over recent years, investor sentiment continues to suggest a degree of apathy, or even negativity, towards the company’s performance. Indeed, the stock trades on a forward price-earnings ratio of under 11 even after its rise since the start of the year.
However, recent updates from the firm suggest it is making progress in delivering on its strategy. Notably, the company has rolled out fibre broadband to over six million properties across the UK. Importantly, it has done so at a lower cost than was previously expected. As such, it appears to be in a strong position to meet its long-term targets in terms of fibre broadband rollout.
In addition, BT has met its £1bn cost savings target earlier than expected. This has allowed it to bring forward its next efficiency-related target, which is to reduce costs by £2bn, by the end of the 2024 financial year. This is a year earlier than expected. And, with the company’s 5G mobile network now covering 40% of the UK’s population, it could be in a relatively strong situation to develop its position in the wider telecoms market.
Of course, investor sentiment towards share prices across the FTSE 100 has improved dramatically in the past 18 months. As such, BT’s shares could offer good value for money on a relative basis.
Clearly, the firm continues to lack a standout improvement in prospective financial performance compared to many of its index peers. For example, its earnings per share is forecast to rise by an annualised rate of around 6% over the next two financial years. This may not act as a particularly strong catalyst for the company’s shares.
However, with a refreshed management team, cost savings and progress in mobile and fibre market positions, the long-term prospects for the company could improve. Therefore, while in the short run there may be further volatility and even weak investor sentiment towards the BT share price, it could offer relatively sound performance versus the FTSE 100 index in the coming years.
Not Investment Advice
Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.