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BT Share Price is Up by 10% in October – Time to Buy?

FTSE 100
FTSE 100

BT share price is up by 0.80% as investors remains optimistic in the company. The shares are trading at 108p, which is the highest level since September 21. It has also outperformed the FTSE 100, which has dropped by 0.15%.

BT has been under pressure

BT, the telecommunication giant, has been under a lot of pressure recently. Indeed, this year alone, the stock has dropped by more than 44%, underperforming most companies in the FTSE. Similarly, in the past five years, the shares have dropped by more than 72%, becoming one of the worst-performing shares in the index. It is now valued at £10 billion.

The company’s decline is mostly because of three main factors. First, its total revenue has dropped from more than £24 billion in 2016 to more than £22 billion in 2019. Similarly, net profit has dropped to slightly above £1 billion. Second, BT’s costs have continued to increase as the company invests in its fiber and the overall network.

Third, and most importantly, BT has slashed its dividend as it tries to conserve cash because of the pandemic. This will be the first time in more than 36 years that shareholders will not receive these payouts.

Still, there are several catalysts for BT share price. For one, there is a wave of consolidation going on in the UK sector. Recently, TalkTalk, a major provider of networking solutions has opened its doors to an acquisition by its biggest shareholder.

Also, as I wrote a few weeks ago, some investors have proposed acquiring BTwith the goal of breaking it. This has seen its stock price rise by ~10% this month.

Finally, at the current price, BT has a price-to-earnings ratio of 4.5, which makes it cheap from a valuation standpoint.

Investors have a mixed opinion about the company’s stock price. Those at UBS lowered their target from 120p to 108p, where it is trading now. Those at Goldman Sachs and JP Morgan have a target of 150p and 160p, respectively.

BT share price technical outlook

The daily chart below shows that BT share price is trading at 108.45. This price is along the upper side of the descending trendline that connects the highest points in June, July, and August. The upward trend is also being supported by the 25-day and 15-day exponential moving averages. Therefore, at this stage, there are two likely scenarios.

First, it could break out above the descending trendline and test the next resistance level at 122p. Second, it may reverse as bulls aim to retest the lower side of the channel at 100p.

BT Stock Price Chart