As a value investor, I’m always looking for cheap, unloved, and unwanted stocks. Ideally, I’m after ‘fallen angels‘ — otherwise solid companies whose share prices have taken a nasty knock. I scour the FTSE 100 index, looking for large companies with depressed shares. And one share marked down for many years is BT Group (LSE: BT.A). Since late 2015, the BT share price has declined steeply. But is it too low and could it enjoy a resurgence?
The fall and fall of the BT share price
In late November 2015, the BT share price briefly topped £5. But then it embarked on a multi-year slump, made worse by the Covid-19 crisis of early 2020. The BT share price ended 2017 at 271.7p and closed out 2018 at 238.1p.
In 2019, BT shares kept falling, finishing the year at 192.44p. But the coronavirus pandemic sent BT stock crashing further. At their 2020 low, BT shares plunged to a record low of 94.68p on 3 August 2020. They then rebounded, ending 2020 at 132.25p.
BT bounces back
At its 52-week high, the BT share price briefly hit 206.7p on 23 June 2021, before slipping back to end 2021 at 169.55p. As I write, this popular and widely held share stands at 183.3p, down 4p (2.1%) today. This values the former telecoms monopoly at £18.2bn. At this level, BT shares trade on a price-to-earnings ratio of 17.8 and an earnings yield of 5.6%. What’s more, the dividend is back after BT cancelled three dividend pay-outs due to Covid-19. With 2021-22’s dividend expected to be 7.7p, BT shares offer a forward dividend yield of 4.2% a year, slightly ahead of the FTSE 100’s cash yield.
Bad news for BT customers
In line with other telecoms providers, BT is set to raise its consumer prices today — and by a record percentage. BT’s yearly price rise is Consumer Price Index inflation for January 2022 (5.4%), plus 3.9% on top. Thus, BT customers will see their monthly bills to soar by 9.3% from today. As a result, the average BT customer will see monthly bills leap by £3.50 (£42 a year). While this is good news for BT’s cash flow and earnings, it’s bad news for the group’s hard-pressed customers.
I think the BT share price could go higher
To my mind, the BT share price could climb higher, but only if several things go well for the company. First, if BT keeps raising its dividend, then this should support (and possibly lift) its shares. Second, French-Moroccan billionaire Patrick Drahi built up an 18% stake in BT in 2021. Drahi and his Luxembourg-based French telecoms firm Altice can’t bid to buy BT before June. But he may make some kind of approach in the second half of this year, which could set the shares alight. Third, BT Sport is talking to Eurosport UK (a division of US media group Discovery) about a new sports joint venture.
Summing up: although BT was a terrible share to own between 2017 and 2021, it’s staged something of a comeback since then. I firmly believe that the BT share price will reach £2 and head beyond there in due course. But I see limited upside to this stock, which is why it won’t be joining my family portfolio.
