BT Group (LON: LON:BT.A) share price has staged a strong recovery this year as the company attracted the attention of two well-known billionaires. It jumped to a high of 145.85p in June, 43% above its lowest level this year. It is also hovering near its highest point since June 9th of last year.
A contrarian buy by billionaires
BT Group, the giant UK telecom company, has become a contrarian investment by two billionaires who believe that it is highly undervalued.
Patrick Drahi, who has a net worth over $6.7 billion, has become one of the biggest investors in the company. He owns a 24.47% stake valued at over £3.8 billion. Drahi derived his wealth from Altice, the second-biggest telecom company in France after Orange.
Last month, Carlos Slim, the 16th richest person in the world, took a big stake in the company, making him the fifth-biggest shareholder. This is notable since Slim owns America Movil, the biggest mobile phone operator in Latin America with over $46 billion in revenue. He also owns stakes in other telecom companies in Europe.
Further, BT Group is also owned by T-Mobile, one of the biggest American telecom companies. T-Mobile is mostly owned by Deutsche Telekom (ETR:DTEGn), the giant German compan, and Softbank.
These investments are highly contrarian since BT Group has not done well over the years. It has crashed by over 51% from its highest point in 2017 and by 60% from its highest level in 2016.
BT Group faces major challenges
The investments happened at a time when the company is facing major issues, especially in its business solutions segment.
Like other telecom companies, its growth has stalled in the past few years since the number of new customers has not been growing.
The only growing division in the company is its Openreach division, which has connected millions of British homes to the internet. Its financial results showed that its revenue rose by 7% to £6.07 billion.
The consumer division’s revenue rose by 4% while the business segment dropped by 25 to £8.1 billion. Openreach’s adjusted EBITDA rose by 9% to £3.8 billion while the consumer segment rose by 5%. The business segment’s figure fell by 16% to £1.63 billion.
These investors likely hope that Alison Kirby, the new CEO will focus on boosting its profitability. Her goal is to create a simpler BT Group that is more profitable.
As part of this growth, she hopes to slash over £3 billion in costs by mostly laying of thousands of workers. In May last year, the company announced that it would slash 55,000 by 2030 and replace them with artificial intelligence.
BT Group share price analysis
BT chart by TradingView
The weekly chart shows that the BT Group stock price bounced back in June after bottoming at 103.30p. Its lowest point was important because it was along the ascending blue trendline that connects the lowest levels since August 2020.
BT is now trading at the upper side of the descending trendline, which connects the highest levels since August 2018. It has also moved slightly above the 50-week and 100-week moving averages, a positive sign.
Therefore, more upside will be confirmed if the price moves above last month’s high of 145.85p. If this happens, the next point to watch will be at 180.55p, its highest level in June 2021. This price is about 44.30% above the current level.
The alternative scenario is where the stock dives and retests the lower side of the triangle pattern at 103.30p. Such a move would see it drop by 25% from the current level.
This article first appeared on Invezz.com
