In the last year the BT Group plc (LON:BT.A) (BT.A.L) share price has declined by 23%. It now trades at less than half of the level that it reached in the latter part of 2015, with investor sentiment coming under severe pressure since then.
In the more recent past, there has been little sign of a sustained turnaround from the company. Its stock price continues to experience a generally downward trend, and this could continue in the short run in my view.
The major changes that BT is making to its business model could lead to further uncertainty at a time when the prospects for the quad play sector are difficult to predict. More companies in the TMT space are seeking to broaden their product offerings in response to the growth prospects within quad play. This means that competition is growing and sales and/or margins could come under pressure.
While the company may be able to put in place a business model that is successful at dominating rivals over the long run, in the short term its financial performance seems to be suffering. Low-single digit EPS growth is unlikely to spark investor interest. That’s particularly the case while sector peers offer double-digit growth potential.
In my view, BT faces a period of further uncertainty and potential difficulties. I feel it has the right strategy through which to generate improving investment performance. But it could take time for this to filter through into stronger financial performance, and even longer for investor sentiment to pick up.
Therefore, in the short run I wouldn’t be surprised if further falls are ahead for its share price. But in the long run it seems to offer turnaround potential. A telecoms major with a PE of 8 appeals to me from a long-term value investing perspective, and so I remain optimistic about its recovery in future years.