Up 40%, can the BT share price continue to soar?

The BT share price has been soaring recently, up around 40% since October. Can it continue such a strong run in 2022 or will it fall?

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The BT (LSE: BT-A) share price has been soaring in recent months and is up around 40% since the end of October last year. So, what has caused this recent rise, and can it continue during the rest of 2022?

What has caused the recent rise?

After many disappointing years, there has finally been some good news for BT investors over the past year and some signs of growth. For example, it seems that the company is capitalising on the opportunities presented by 5G. Indeed, BT’s 5G network covers over 40% of the UK’s population and it has over 5.2m 5G-ready customers. In the most recent quarter, it added 1.2m 5G customers, demonstrating the growth the company may be capable of.

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BT’s subsidiary, Openreach, is also making excellent progress with its fibre-to-the-premises (FTTP) network. This is an ultra-fast network that connects customers straight to the exchange. Openreach has now rolled this out to around 6m premises, and it is expected to reach around 25m premises by 2026. As such, it’s clear that there are growth opportunities, and hopefully this will be reflected in future profits.

The BT share price has also reacted positively to the decision to sell BT Sport. The estimated figure for this sale is around $800m, and the buyer is expected to be DAZN. Nonetheless, there is also interest from Discovery, and this may lead to a bidding war, which could see BT Sport sold for more. This sale will allow further investment into Openreach, and could potentially be returned to shareholders as dividends. It seems like a shrewd decision to me.

Finally, I’m also impressed by the firm’s cost-cutting measures. In fact, it has already hit its £1bn cost savings target 18 months early, and this allows it to bring forward its FY25 target for £2bn of savings to FY24. These cost savings will hopefully see an improvement in profits over the next few years.

My concerns

The one key risk with BT is its huge pile of debt. In fact, net debt has continued to rise over the years, and it currently totals £18.2bn. This restricts BT from investing significant amounts into the business, as this debt needs to be paid off. Due to extremely large interest payments, it also has a negative effect on the company’s profits. This is likely to worsen as the Bank of England raises interest rates due to the soaring rates of inflation. As such, this is a risk which could cause the BT share price to fall.

Overall verdict on the BT share price

After years of disappointment, I believe that management are making several steps in the right direction. For income investors, there has also been the return of the dividend. This is likely to grow over the next few years, making BT a potentially good income stock as well. Therefore, although operational challenges remain, I feel that the BT share price can continue to soar. This is a value stock I’d consider adding to my portfolio.

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Stuart Blair has no position in any of the shares mentioned. 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.

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