It’s been a rough start to 2024 for BT (LSE:BT.A) shares. They’re down 15.7% already. And a declining share price seems to be a common theme.
In the last 12 months, the stock’s lost 23.7% of its value. Zooming out further, the last five years have seen it fall by 53.8%.
Currently, BT is sitting at a 52-week low. That doesn’t bode well for shareholders. But as someone who has had the stock on their watchlist, could it present an opportunity to get in?
What’s going on?
To answer that, I’m intrigued to figure out what’s behind this downfall. Well, one main reason for this is that BT has offered little to no top-line growth over the past couple of years.
Revenues have fallen since 2019. With the exception of 2022, pre-tax profits have also dropped year on year. As such, investors have fallen out of love with the stock.
On top of that, the firm has also faced stiff competition in recent times from alternatives. Granted, BT still has a 30m-strong customer base, but its been losing customers in the past few years to peers such as Virgin Media and City Fibre.
Going forward, this is a concern. Customers will be hunting around for cheaper deals given the cost-of-living crisis. It maybe BT loses further market share.
There are temptations
That said, there are positives I see with BT. To start, it now looks incredibly cheap. It currently trades on just 5.7 times earnings. That’s below the FTSE 100 average by some distance.
On top of that, with its share price taking a hit, it now offers a 7.3% yield. Analysts predict that the business will increase its dividend in 2024 and 2025, so there’s potential for further growth. However, dividends are never guaranteed.
But a low valuation and high yield are a combination I like. And there are other attractions to BT. Namely, it’s a business with strong brand recognition making solid progress on initiatives such as its Openreach programme. It’s also on track with its transformation programme that’s made £2.5bn in savings so far.
Issues remain
But even so, issues remain. For example, the firm has a massive debt pile on its balance sheet. As of 30 September, this stood at around £20bn. That’s nearly double its market-cap. What’s more, with interest rates expected to remain elevated for the foreseeable future, this will only make paying off debt more challenging.
I’ll be avoiding the stock
With that, while there are things to like about BT shares, I won’t be adding them to my portfolio today.
It’s a strong brand. And right now, it looks cheap. But there are too many issues surrounding the company for me to want to buy. Its debt worries me. The threat from competition is also concerning.
I’ll keep it on my watchlist for now. But I’ll be searching for other shares to snap up before I make a move on BT.
