The BT share price is rising fast. Here is what I would do now

The BT share price has risen sharply in March on company level developments. Are they enough to sustain the rise, though?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FTSE 100 telecom biggie BT (LSE: BT-A) is finally seeing an upturn in its share price, even if it is in fits and starts. The BT share price started its upward climb in November last year as the stock market rally started.

Or so it appeared. By early January this year, it had started plunging again and remained uncertain in February. But since the start of March, it has risen by an impressive 14%. 

Can the BT share price rise continue?

I think the question for investors now is – can this rise continue? This question is important because there are at least two trends that suggest otherwise:

#1. The BT share price is back to its pre-crash levels now, in line with a trend seen across other FTSE 100 stocks. This means that there has to be fresh impetus for the share price to rise from here. Is there?

#2. When the stock market crash happened last year, the BT share price was already falling. In fact, it had been falling for a long time. So has anything changed fundamentally to allow a share price rise now?

What guides the BT share price?

The key point here is that there is a case for a rise in the BT share price if there are indeed positive fundamental changes at BT or if all shares prices are ready to rise on the back of sheer investor optimism. 

The latest BT share price rally coincides with the departure of Chair Jan du Plessis. In his four years with the company, the BT share price halved. But the fact is that the BT share price had been falling since late-2015. The company has a bunch of issues to deal with, including a competitive market and a business that requires huge investments. 

At least until early 2020 it had an impressive dividend yield. But even its dividends were cancelled last year, which left little incentive to buy the struggling stock.

What happens next?

I reckon that things can change for BT. It does intend to bring its dividend back. This should be a positive for income investors, going by BT’s high dividend yield in the past. 

While its financials suffered a setback in 2019, the fact is that otherwise it is a resilient, profit-making company with a market-leadership position, even if it is not exactly the fastest growing. But that could change too

And it is a cheap UK share right now. The company’s price-to-earnings ratio is at around 9 times. 

The takeaway

I think on balance, the odds in favour of BT are even, considering the challenges it faces. Another stock market rally could tilt the odds firmly in its favour, though.

Otherwise, however, as much as I like the company (and have already bought the share in the post-Covid-19 world), I would watch for a few more signs of turnaround before buying it again now. Just to be doubly sure at an uncertain time.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of BT GROUP PLC ORD 5P. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

This FTSE 100 fund has 17% of its portfolio in these 3 artificial intelligence (AI) growth stocks

AI continues to be top of mind for a lot of investors in 2024. Here are three top growth stocks…

Read more »

Growth Shares

Here’s what could be in store for the IAG share price in May

Jon Smith explains why May could be a big month for the IAG share price and shares reasons why he…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

FTSE 100 stocks are back in fashion! Here are 2 to consider buying today

The FTSE 100 has been on fine form this year. Here this Fool explores two stocks he reckons could be…

Read more »

Investing Articles

NatWest shares are up over 65% and still look cheap as chips!

NatWest shares have been on a tear in recent months but still look like they've more to give. At least,…

Read more »

Two white male workmen working on site at an oil rig
Investing Articles

The Shell share price gains after bumper Q1! Have I missed my chance?

The Shell share price made moderate gains on 2 May after the energy giant smashed profit estimates by 18.5%. Dr…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

1 market-beating investment trust for a Stocks and Shares ISA

Stocks and Shares ISAs are great investment vehicles to help boost gains. Here's one stock this Fool wants to add…

Read more »

Investing Articles

Below £5, are Aviva shares the best bargain on the FTSE 100?

This Fool thinks that at their current price Aviva shares are a steal. Here he details why he'd add the…

Read more »

Investing Articles

The Vodafone share price is getting cheaper. I’d still avoid it like the plague!

The Vodafone share price is below 70p. Even so, this Fool wouldn't invest in the stock today. Here he breaks…

Read more »