Does the BT Group plc share price face an uncertain path to recovery?

Could further challenges be ahead for BT Group plc (LON:BT.A) (BT.A.L)?

BT Group plc
BT Group plc

The BT Group plc (LON:BT.A) (BT.A.L) share price continues to face a period of uncertainty in my view. The company’s value may have increased by over 50p per share in the last six months, but I feel that it could experience continued ups-and-downs over future months.

One reason for this is the general uncertainty surrounding the FTSE 100 at the moment. The prospects for the world economy continue to be uncertain, and this could cause investor sentiment to remain subdued towards shares in general. It may even mean that investors gradually adopt an increasingly risk-off attitude which leads them to perceived lower-risk assets.

Given the forecast fall in BT’s EPS in the current year and next year, as well as the changes it is making to its business model, I believe it could be viewed as a relatively risky share by investors. Although it already has a P/E ratio of under 10 at the moment, I wouldn’t be surprised if its share price experiences significant volatility in the near term.

Added to this is the prospect of a new CEO in 2019. He could decide to make revisions to its strategy, and this may lead to a period of further uncertainty. In my view, the current strategy could improve the financial and operational performance of the business. Job cuts are tough for those involved, but could create a better business which is more able to compete with rivals in an increasingly competitive quad play industry.

Therefore, in my opinion the prospects for the BT share price may be positive in the long run. I believe it has a margin of safety and may be able to deliver improving financial performance under its new strategy. But with wider market risk being elevated at the moment and the company experiencing a period of change, I feel that investors may desire a larger discount to its intrinsic value in the near term.

About Robert Stephens 5430 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 or use one of the other contact methods available on the 'Contact Us' page