BT share price is down by 0.49% today as worries of a no-deal Brexit reverberate in the United Kingdom. The stock is trading at 132.50p, which is still 40% above the year-to-date low of 94.55p. It has a PE ratio of 5.66 and a market cap of more than £13.3 billion.
BT long track record of underperformance
For starters, BT is a giant British telecommunication company that was previously owned by the government. The company was privatised in 1982 when the government sold about 50% of its stock to investors.
Because of the previous ownership, the company dominates major parts of the country where it has a major presence.
However, BT has also been a major disappointment to its shareholders. One of its biggest mistakes was in early 2000s when the company spun-off its wireless division in 2002. It later on sold the business to Telefonica. Realizing this mistake, the company spent about £12 billion to buy EE in 2016.
Other top mistakes by BT was its entry into sports broadcasting, underinvestment in broadband, and global M&A that pushed its debt to record highs.
Investors have been punished in return. In the past 5 years, BT share price has dropped by more than 72%. Its revenue and profitability have also been on a downward trend.
BT acquisition chatter
The recent underperformance by BT has made the company relatively cheap. As mentioned, it has a market cap of about £13.3 billion and a PE multiple of about 5.66. It also has more than £22 billion in revenue and a profit before tax of more than £2.3 billion.
This PE multiple is significantly below the average of European telecommunication companies. According to Statista, these firms have a PE ratio of above 16.
As a result, as we have written before, there have been chatter about BT being acquired. Some American private equity companies have talked about acquiring and then spinning out its Openreach division. That’s the division that houses the biggest fibre company in the UK.
However, the biggest risk is whether the UK government would agree to such a transaction. Another risk is that the firm carries as much as £30 billion in pension debt.
So, is BT a good investment?
On the daily chart below, we see that BT share price reached a YTD low of 94.80 in August. Since then, it has been on a slow upward trend has seen it move above the 50-day and 200-day exponential moving averages. While a golden cross has not yet happened, it is relatively close.
The current resistance is mainly because the stock is at the 38.2% Fibonacci retracement. Therefore, I suspect that BT share price will continue rising as bulls aim for the 50% retracement at 152p. This is a 15% increase from the current level.
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BT Group shares technical chart
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