The last 12 months haven’t been great for the BT (LSE: BT-A) share price. Within this period, the stock is down nearly 10%. In the last six months alone, BT stock has plummeted nearly 20%.
So, why is this? And is this a chance for me to buy some shares?
Why is BT down?
Why has the telecommunication giant suffered so much? Well, the obvious answer to this is inflation and investor nervousness about that. With rates surpassing 10% in the UK for July, this year has been incredibly volatile and we’ve seen untold amounts wiped off markets.
The stock has also suffered due to staff strikes. BT and the Communication Workers Union (CWU) had been locked in negotiations for weeks. And with BT’s previous offers failing to meet the wishes of the CWU, workers have been forming picket lines to show their discontent. With two further strikes set for next week, this could see BT suffer further.
Finally, the FTSE 100 firm also saw its share price fall following the release of its half-year results. While it contained positives, investors focused on the 10% drop in pre-tax profits to £482m.
An opportunity to buy?
Despite these issues, could now be a good time for me to open a position in BT?
Well, one tempting factor is its dividend yield. As its share price has fallen, its yield has been pushed up to around 5%, comfortably above the average of its FTSE 100 peers. While purchasing BT stock isn’t going to completely hedge me against inflation, this passive income stream certainly provides better value than keeping my cash in the bank.
There has also been plenty of speculation recently surrounding billionaire Patrick Drahi’s 18% stake in the firm. It was widely expected that measures would be put in place to block future purchases, or even rescind Drahi’s position. However, the UK government has given the Altice (Drahi’s business) stake in BT the all-clear.
This could theoretically open the door for a potential takeover, which would no doubt boost the BT share price.
But as the government also said that future acquisitions will be “subject to a separate assessment“, it seems Drahi may be restricted should he attempt a full takeover.
While BT reported a drop in pre-tax profits, I saw potential in the results it released. The business managed to grow its revenue for the first time since 2017, albeit by 1%. And with the continuous expansion of its already large infrastructure, such as its Openreach network, comes a degree of pricing power. After all, higher pricing in broadband and phone contracts contributed to its sales growth in the last quarter. In the volatile times we’re facing, for me this is key.
But a big concerning factor is its large pile of debt. This may hold the business back in its attempts to move forward.
However, I’d still be happy to open a small position in BT today. It does face headwinds. But with a fairly set of strong results, its stable nature, and its dividend yield, I think the stock could add something to my portfolio. The potential of a takeover is an added bonus, but I’d never buy just for that. I like to invest for the long term in businesses I believe in.
