The Motley Fool

What’s next for the BT share price?

Image source: BT

Since the start of 2021, the BT (LSE: BT-A) share price has risen over 30%. At one point, it was even able to reach 200p for the first time since December 2019. Nonetheless, it has since fallen back to around 184p. As such, is this the start of a major decline or can the BT share price reach its pre-pandemic highs?

Trading update

Despite the impact of the pandemic, the fiscal year 2021 trading update was decent. Indeed, revenues were £21.3bn, only 7% lower than the year before. Profits were also fairly resilient, 15% lower than the previous year at £1.47bn. These results demonstrated that BT has been able to navigate its way through the pandemic while remaining profitable, and this is definitely a promising sign.

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...

I was also impressed that the company had managed to reduce its net debt slightly to £17.8bn. Although this is still far higher than I would like, it is certainly a move in the right direction. This was especially impressive because a number of other UK companies were forced to issue more debt to survive. If net debt can be cut further, I feel that it will allow more investment in other areas in the company. This would likely have a positive effect on the BT share price.

Other factors

There are a number of other factors that I feel may impact the BT share price. Firstly, there is the potential sale of BT Sport. Although no buyer has been found yet, I believe that a sale would have a positive impact on the share price. This is because it will allow the company to focus on its core telecommunications business. I feel that such a simplification of the business will help it increase profits.

Another promising sign was the recent investment from Patrick Drahi, who took a 12% stake in the business. Drahi is the founder of Altice, a French multinational telecommunications corporation. Therefore, his investment shows optimism that BT can grow profits over the next few years and is currently underpriced.

One key risk for the company is its huge pension deficit of £8bn. There are two main reasons why this is such a problem. Firstly, it needs paying off, and this is likely to strain profits over the next few years. Secondly, it may deter any potential bidders for the company, something which usually causes a rise in the share price. This is despite previous takeover speculation.

Has the BT share price got further to rise?

I personally don’t believe that the BT share price will be able to reach its pre-pandemic highs any time soon. The telecommunications market in Europe is mature, and BT faces a large amount of competition.

Despite this, I still feel that the share price has further to rise. It has price-to-earnings ratio of around 10. This indicates a fairly cheap valuation. And I expect that the company will reinstate its dividend soon. Not only would this potentially attract dividend investors, but it is a major sign of optimism. As such, I believe that the BT share price has some upside potential, and I am tempted to add some shares to my portfolio.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. 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 click below to discover how you can take advantage of this.