Having risen by around 25% since May, investor sentiment towards BT Group plc (LON:BT.A) (BT.A.L) appears to have improved significantly.
Sure, it may still be trading at around half of its level from three years ago. But gains made in recent months may indicate that investors are beginning to back the company’s revised strategy in my opinion.
Of course, a key part of its strategy is creating a more efficient business which is better able to compete in what is becoming an increasingly crowded quad play market. To that end, it has commenced major headcount reductions which totalled around 2,000 last month. Further job cuts are anticipated, and this could create a more flexible and leaner business in my view.
Alongside this, BT continues to invest in a variety of areas, with its consumer offering having the potential to deliver strong growth in my opinion. The company’s recent quarterly results showed a lack of significant financial improvement to my mind, but from an operational standpoint I feel that the company is making progress.
With a new CEO set to start work at the company in the next few months, further changes may be ahead. But I think that if the business keeps the current strategy and is able to execute it successfully, it has the potential to create a stronger and more profitable entity over the long run.
Ultimately, the BT share price could recover in my view. This may take time, though, and in the near term I wouldn’t be surprised if there is further volatility. The forecast for two years of EPS falls in the next two financial years could cause investor sentiment to be held back to some degree, while a P/E ratio of around 10 suggests that sentiment may have improved, but remains at a relatively low level to my mind.
Therefore, I’m cautiously optimistic about the stock’s outlook at a time when the prospects for a number of FTSE 100 shares remains uncertain.