BT Share Price: Cheap but Risky for Investors?

BT group
LONDON, UK - JUNE 20TH 2015: The homepage of the official BT (British Telecom) webiste, on 20th June 2015.

BT share price is down by 6 percent this month, continuing a bearish trend that has seen its value drop by a third since the year started. However, as the year comes to a close, investors are looking for avenues to invest, and BT’s share price has been one of them.

Will BT Share Price Recover in 2023?

The BT share price has struggled throughout 2022, resulting in its value dropping by a third. However, as the year comes to an end, there is a glimmer of optimism that BT might recover in 2023. For starters, BT has a number of potential positives that could potentially boost its performance in the future. The company’s Openreach division is building Britain’s largest fiber-to-the-premises network, which could benefit the company in the long term. Additionally, BT is planning to merge its Global and Enterprise divisions and has expanded its partnership with Nokia, which could improve its products and services and potentially boost its top and bottom lines.

From a value investing perspective, BT shares also appear to be cheap, with a forward-looking price-to-earnings (P/E) ratio of under six and an attractive dividend yield of around 6.8%. However, it’s important to consider the risks involved in investing in BT shares, including the company’s low growth, low profitability, and significant debt burden. It’s always a good idea to thoroughly research a company before making an investment decision.

Additionally, BT may face regulatory hurdles and could be impacted by rising interest rates, which could affect its earnings potential. Some analysts are also concerned about the company’s profitability in the face of declining economic conditions and increased competition, as well as the impact of high costs related to its fiber and 5G rollout on its balance sheet. The company’s net debt has increased to above £19bn and it plans to spend £5bn this year and £4.8bn in the following years on these investments, which could potentially impact its ability to continue paying high dividends in the future. 

Therefore, based on the information above, although it does appear that BT’s share price is in better shape for recovery next year, investors will still need to be cautious about macroeconomics, such as the rising inflation rate in the UK. However, if all the factors remain constant, I expect to see BT’s share price start to recover in the first quarter of 2023.

There is a high likelihood that, in the first few months, we might see BT’s share price returning back to trade above the 150p price level.

BT Daily Chart

BT Share Price