The Motley Fool

BT shares are gaining on today’s news. Is it time to buy?

Image source: Getty Images

BT (LSE: BT-A) shares were among the biggest risers in the FTSE 100 this morning as the company released a surprisingly upbeat half-year report.

Could now be the time to finally be bullish on the company? While not entirely convinced, I certainly think there are reasons for holders to be more positive than they were. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

“Relatively resilient”

Revenue at the telecommunications titan came in at £10.6bn over the six months to the end of September. This was 8% lower than over the same period in 2019. Nevertheless, this performance was regarded as “relatively resilient” considering the impact of Covid-19 on parts of the business.

BT has been hit by cancellations to the sporting calendar. It’s also seen a decline in sales of legacy products and lower business activity. As such, simply meeting expectations was probably as good as investors could hope for. 

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) came in 5% lower (£3.72bn) than the previous year. However, this was helped by cost-saving measures introduced by management. Pre-tax profit fell by 20% over the period to £1.06bn.

On an operational front, BT said that its rollout of fibre broadband has hit record levels in the second quarter of its financial year. The FTSE 100 firm also stated that its 5G-ready customer base was now over one million and that this network was available in 112 towns and cities in the UK.

However, it’s the better-than-expected outlook that seems to have got the market excited about BT shares. 

Positive outlook

Today, the company announced that it would be raising the lower end of its guidance on 2020/21 earnings. This would now be between £7.3bn and £7.5bn. As a result of more cost-saving and sales of growth products, BT then expects this number to rise to “at least £7.9bn” in 2022/23. 

But there’s more. The fact that earnings are now expected to be higher than previously expected makes it increasingly likely that BT will go ahead and reinstate dividends axed earlier this year.

Right now, there’s no mention of how large this payment might be (it’s likely to be low). However, this news has clearly been welcomed with open arms by a market desperate for some light at the end of the tunnel. After all, BT’s biannual cash payouts have been one of the main reasons to hold the stock over the years. 

BT shares: too cheap?

It’s hard to ignore the fact that the performance of BT shares over 2020 so far has been pretty dire. Priced just below the 200p mark in January, they’re now up for grabs at almost half this price.

With markets skittish over the possibility of rising coronavirus infection rates and more restrictions being enforced, there’s clearly no guarantee they won’t resume their downward descent after today. Having fallen for so long, it’s not unreasonable to be sceptical on BT, especially with net debt of almost £18bn. 

Then again, today’s numbers and news could turn out to be the point at which the shares begin to look a tad more appealing, particularly for income investors.

So, while I wouldn’t pile in just yet, I wouldn’t be against building a position from this point either. On less than six times forecast earnings before today, a lot of concerns appear to be priced in. 

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Paul Summers 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.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.