Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Idea Of The Day: BT May Attempt To Stem Share Price Slide

Published 11/07/2017, 17:10
Updated 18/05/2020, 13:00

What: The market is eagerly awaiting BT Group’s AGM on Wednesday, ahead of its latest Q2 earnings update at the end of this month. The AGM is expected to see the outgoing chairman and the CEO face tough questions on BT’s Italian accounting scandal, the pension deficit and regulatory changes. The market will be looking to see if the bad news is behind BT (LON:BT), and to assess whether the future looks bright.

How: While the earnings data released on 28th July will be critical for the BT share price, we believe that the market may use the AGM as an opportunity to get a sense of whether BT’s senior team have a strong enough grip on the crisis to lead to a reversal in the share price, which has fallen to a 4-year low recently.

Investment bank analysts are fairly split on the outlook for the BT, with some looking for a reversal of fortune, arguing that the bad news is now in the rear view mirror. However, others argue that BT’s problems remain severe, the accounting scandal in its Italian unit blew a £500m hole in the BT balance sheet, while the massive pension liability is also costing BT £500m a year. Combined with criticism that BT Sport overpaid for the rights to air the Champion’s League, which will cost BT £7m a match, investors’ are likely to question BT‘s commitment to turn itself around and manage its spending and future growth prospects. Questions on this topic could be the hardest for the BT exec team to answer, and, if the answers are not satisfactory, it may hit the share price later this week.

Interestingly, while BT’s cash position has deteriorated in recent quarters, it continues to maintain decent revenue growth and its book value per share is 0.84, meaning that shares are trading significantly below book value. If you believe that the bad news is behind BT, especially now that it is planning a cost-cutting drive, then this stock may look like good value.

BT: the technical view

From a technical perspective there is nothing to suggest that BT’s share price will rise. It remains at its lowest level since 2013, and recently fell below the 68.2% retracement of the 2012-2015 uptrend, which is a bearish sign. In the short term we would need to see a break above 295p – a recent high – to get excited that this stock could be due to a rebound ahead of the earnings data later this month. The Ichimoku cloud base is another critical level of resistance at 308.70p, above here suggests that the downtrend in BT’s share price could be taking a pause or may even be coming to an end.

Overall, the bar is high to a recovery in BT’s share price, its reaction to the AGM later this week could be a test to see if investors’ are willing to give BT a chance at recovery.


Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.