- Summary:
- BT share price has jumped by 8% as the company eyes a return of its dividend. I suspect that the shares will continue rising in the near term
BT share price is up by more than 8% in early trading as investors react to the company’s financial results. This makes BT the best-performing stock in the blue-chip FTSE 100 index, which is down by 0.10%.
BT financial results
For starters, BT is the biggest telecom company in the United Kingdom with a market cap of more than £10 billion. It is also an embattled company whose shares have dropped by almost 50% in the past 12 months and by 5.75% in the past three months. This weak performance has been because of the company’s decision to pause dividends and because of the overall challenges associated with the pandemic.
Today, BT share price is rising because of the better-than-expected third-quarter results and the fact that the firm is considering reinstating its dividend. In total, the company’s revenue declined by 8% to £10.59 billion in the first half of the year. Its earnings before interest, tax, depreciation, and amortisation fell by 5% to £3.72 billion. Notably, its profit before tax fell by 20% to £1.06 billion. Also, the company boosted its forward guidance.
In terms of operations, the company noted that more than 1 million customers in the UK are using its 5G network. It also increased the number of FTTP customers by 60% year-on-year. It is also cutting costs aggressively, with the modernisation program leading to more than £352 million savings.
Is BT Group stock a buy?
Some analysts believe that BT share price are relatively cheap and worth buying now. They cite the £10 billion valuation, which they believe is below the overall £20 billion valuation of its OpenReach product. Indeed, according to the Financial Times, a group of private equity companies have expressed interest in buying the firm. Their goal would be to buy it and separate its business into two.
Another major challenge for BT is that it is a highly-indebted company. It has more than £18 billion in debt and more than £50 billion in pension liabilities. The firm will also need to spend millions of pounds to upgrade its network to 5G. Another challenge is that the government could decide to veto any acquisition, especially by an American firm like KKR. This is because of its dominance in UK’s broadband.
BT share price outlook
The four-hour chart shows that BT share price has gapped up higher today to a high of 110.95p, which is the highest it has been since September 18. The price has also moved above the 15-day and 25-day exponential moving averages. It is also slightly below the resistance level at 112.35p, which is the highest it has been in August and September.
Therefore, in the immediate near term, I suspect that the shares will pause as bears attempt to fill the gap and then advance to the resistance at 112.35p. The support for this prediction is the 15-day and 25-day EMA at 103.25.
BT share price chart
