A constituent of the FTSE 100 index, BT (LSE:BT.A) is a global leader in the telecommunications industry. It owns well-known brands like BT Sport and EE. With consistent historical results and joint venture discussions in full flow, I think that the BT share price might soon take off. It currently trades at 185.3p, up 18% in the past year. Should I be adding this company to my long-term portfolio? Let’s take a closer look.
Financial results and the BT share price
For the years ended March, between 2017 and 2021, revenue fell from £24bn to £21.3bn. In addition, profit before tax declined from £2.3bn to £1.8bn.
While these figures have not increased over the long term, they are consistent. I will be watching closely for the 2022 results that are due imminently. There is a risk that further falls in profit could have a negative impact on the BT share price.
In a trading update for the nine months to 31 December 2021, however, the firm announced that it had normalised free cash flow of £878m. This suggests that the business has plenty of scope to either expand or control its debt pile.
The update also mentioned that BT was in discussions with US media conglomerate Discovery. The two companies are in advanced stages of agreeing a joint venture in sports streaming. This would give BT access to channels such as Eurosport UK, further enhancing the firm’s presence in the sports streaming world.
This possible joint venture comes after talks between BT and streaming service DAZN broke down. Worth a potential $800m, neither business could come to an agreement earlier this year.
Takeover rumours and a bargain share price
Much has also been written about French telecommunications mogul Patrick Drahi. The owner of Altice Communications, he increased his stake in BT by about 50%. He now owns about 18% of the company.
Many have speculated that Drahi is attempting a slow-motion takeover by snapping up shares over a period of time.
UK takeover rules mean that we will have to wait until the summer to find out Drahi’s real intentions. If he is planning a takeover, then the BT share price will likely skyrocket.
The investment bank Berenberg also increased its price target for BT shares in February to 225p. This is due to over 60% of BT’s revenue being linked to inflation.
Indeed, the bank believes this puts BT in a more favourable position to grow earnings and weather future inflationary pressures.
The current BT share price may also be cheap. Using forward price-to-earnings (P/E) ratios, we see that BT has a ratio of 8.92. This is lower than two major competitors, Vodafone and Orange, that have ratios of 15.24 and 9.43 respectively. It is good to know I may be getting a bargain by purchasing shares soon.
Overall, the company is exploring an exciting venture and takeover rumours are swirling. The low P/E ratio, improved cash flow, and a high proportion of inflationary-linked revenue, however, are factors that make the firm attractive. Altogether, I think the strongly suggests that the BT share price may head even higher. I will be buying shares soon.
