2 reasons why I think the BT Group plc share price could rise

I’m feeling optimistic about the prospects for the BT Group plc (LON:BT.A) (BT.A.L) share price

BT Group plc
BT Group plc

The performance of the BT Group plc (LON:BT.A) (BT.A.L) share price has been relatively disappointing so far in 2017. It fell heavily in the earlier part of the year following a profit warning and has failed to recover to its previous level.

In my opinion, the BT share price may remain volatile and uncertain in the short run at least. The company is making a number of changes to its business model, including management changes, and it may take time for it to deliver on its potential in my view.

However, I think in the long run that the company has investment appeal. I’m feeling optimistic about its prospects for two main reasons.

The first is its strategy. Although the changes the company is making may be causing some disruption, I think in the long run they could lead to an improved business model.

For instance, the investment the company is making in sports rights may mean customer loyalty improves. This could give BT an economic moat of sorts and also lead to potentially higher margins versus rivals in what is a highly competitive quad play sector.

Further, the acquisition of EE also makes me optimistic about the company’s future. I think it has created a dominant player within the quad play space and could lead to cross-selling opportunities further down the line.

The second reason I’m upbeat about the prospects for the BT share price is its valuation. It has a P/E which is barely in the double digits, and I feel this could signal that there is capital growth potential.

Although the company is forecast to record flat earnings growth over the next couple of years, I nevertheless think the strategy it has and the dominant position it occupies in the quad play market could lead to an improving investment outlook for the long term.

About Robert Stephens 2805 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email info@investomania.co.uk or use one of the other contact methods available on the 'Contact Us' page