BT Share Price Gets Extremely Oversold. Should You Buy the Dip?

Summary:
• BT share price has been in an intense sell-off in the past few weeks as concerns about the company’s future growth remain.

BT share price has been in an intense sell-off in the past few weeks as concerns about the company’s future growth remain. The stock crashed to a low of 140p, which was the lowest level since November 2021. It has dropped by 30% from its highest point this year. In total, BT Group share price has tumbled by over 15% this year and underperformed the FTSE 100 index.

Concerns about growth and profitability

BT Group has come under intense pressure as the telecommunication giant goes through a challenging period. For one, the company is expected to have thinner margins as the cost of doing business rises. For example, the company has seen its staff go on strike as they fight for better wages as inflation rises. 

The surge in inflation will also hurt business spending, which could hurt its corporate segment. This, will in turn lead to low average revenue per user (ARPU) growth in the coming quarters. Another major risk is in its broadband division known as Openreach. There are signs that companies like TalkTalk and Virgin are starting to take market share.

In a major win, BT Group announced that it was partnering with Scottish Power in a multi-million-pound contract. The company will become the leading tech provider of critical national services in Scotland and deliver connectivity solutions to ScottishPower. For example, ScottishPower will use BT’s technology on its wind farms to take things like temperature. 

Still, the company is facing slow revenue and profitability growth. In the most recent financial release, BT Group said that its revenue jumped by just 1% to 5.1 billion pounds while its profit before tax fell by 10%.

BT share price forecast

The daily chart shows that the BT stock price has been in a strong bearish trend in the past few weeks and the situation is getting worse. The sell-off accelerated when the stock dropped below the important support level at 172.55p, which was the neckline of the triple-top pattern. Since then, it has dropped below the 25-day and 50-day moving averages.

The Relative Strength Index (RSI) and Money Flow Index (MFI) have moved to the oversold level. Therefore, the stock will likely continue falling as sellers target the next key support at 125p. A move above the resistance at 150- will invalidate the bearish view.