Can the BT share price continue to rise?

The BT share price rose about 75% in the past year. Royston Roche makes a deep dive analysis of the stock.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The BT (LSE: BT.A) share price rose about 75% in the past year. The company has been one of the best-performing stocks in the FTSE 100 index this year.

reviewed the company earlier this year. The stock is up around 40% since I purchased it for my portfolio. Here, I would like to analyse the company to decide whether to hold or sell my shares.

BT company’s fundamentals

BT’s fiscal year 2021 revenue fell 7% to £21.3bn. This was in line with the management’s estimates of the impact of Covid-19. Net profit dropped 15% to £1.47bn. The company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) came at £7.4bn, which was in line with the management estimate of £7.3bn to £7.5bn. Overall, in my opinion, the financial results were good. 

Next, the company’s modernisation programme is progressing well. It delivered gross annualised savings of £764m in the first year with an associated cost of £438m. It has a target to save £2bn with an associated cost of £1.3bn over a period of five years.

The UK government has increased its investment focus in the telecom sector. Also, Ofcom recently published the outcome of the Wholesale Fixed Telecoms Market Review, which was in favour of the company. It will give the company greater regulatory certainty and confidence to earn a fair return on its Fibre to the Premises) investment. 

BT was also able to get an additional 5G spectrum for £475m. The price was lower than the previous estimates. So, the company was able to get a refund of £227m. This will help the company’s efficient rollout of 5G services and increased the cash available for investment.

BT is considering selling BT Sports. Since its launch in 2013, it has increased its visibility in homes and pubs. However, it has been a drag on the company’s profits. The move is aimed to focus on BT’s core telephone business and investments in the full-fibre and 5G networks. This, in my opinion, will also increase profits.

The BT share price – risks to consider

The company has a net financial debt of £11.7bn compared to £11.3bn at the end of March 2020. I think this debt is high for the company. It has a debt-to-equity ratio of 1.43. This is a bit of concern for me. 

The telecommunications markets are mature and highly competitive. This could put pressure on the company’s profits. It faces tough competition from Sky, Vodafone, and Virgin Media, among others. Not to mention the huge capital investments required to update with the latest technology. 

Final view

Taking all things into consideration, I think the positives outweigh the risks for the company. I believe that the BT share price will continue to rise and I have no plans to sell my shares today. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Roche owns shares in BT Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »