BT Share Price Ripe For a Breakout as Takeover Rumours Return
BT share price is among the best-performing in the FTSE 100 today. Up by almost 3%, the telecommunication giant is only behind Ashtead, BP, Royal Dutch Shell, and Halma, which are all up by more than 3%. The shares are trading at 106.85p.
BT, a leading telecommunication company in the UK, has seen its stock price drop sharply this year. The stock has dropped by more than 44%, underperforming the FTSE 100, which is down by more than 28% this year. The shares are also down by more than 73% in the past five years.
Part of the reason for this is that BT’s revenue has been on a downward trend. The revenue has dropped from more than £24 billion in 2017 to £22 billion in 2019. Its profitability has also dropped from £1.9 billion to more than £1.7 billion.
This year, the company’s stock has dropped because of the pandemic, which has affected parts of its business. As a result, it has been forced to suspend its dividend until 2022, becoming one of the biggest companies to do that. It has also started a restructuring activity that it hopes will save it more than £2 billion pounds.
Now, BT share price seems to be rising as the company becomes part of a takeover bid. According to the Financial Times, KKR, the giant American private equity firm has expressed interest in the telecommunication company. And yesterday, Sky announced that some companies are attempting to buy it for about £15 billion, which would be a premium over its current market cap of just £10 billion.
Analysts say that the idea for any acquirer would be to acquire the company and focus on the OpenReach product, which is valued at more than £20 billion. For starters, OpenReach is the company’s broadband division and is the most profitable of its business.
Still, BT has risks. For one, it is one of the heavily indebted firm in the UK with more than $18 billion in debt. It also has pensions liabilities worth more than $50 billion.
Analysts seem to believe that BT share price is relatively cheap as acquisitions talks remain. In a note this week, analysts at Barclays boosted their target to 160p based on the improving outlook of its OpenReach product. Those at Citi and Deutsche Bank expect that the shares will climb to 106p and 125p. In total, according to MarketBeat, the average share price target by analysts is 172p, implying an upside of more than 60%.
BT Group Share Price Forecast
The daily chart below shows that BT share price formed a near triple bottom pattern between 94p and 97p. This bottom is shown in green and is usually a sign that bears can’t manage to push it below that level. The shares are also attempting to move above the 50-day and 100-day exponential moving averages, which is also a bullish sign.
Therefore, I suspect that the price will continue rising as bulls aim for the next resistance level at 115p, which is along the descending black trendline. On the other hand, a move below the YTD low of 94p will send a signal that there are more bears in the market.