Is BT Group plc due a pullback after a 22% rise in 6 months?

Could BT Group plc (LON:BT.A) (BT.A.L) experience a declining share price?

BT Group plc
BT Group plc

The last six months have been a major improvement for the BT Group plc (LON:BT.A) (BT.A.L) share price. It has risen by 22% after falling by 60% in just over two years.

Investors, it seems, have become increasingly positive about the prospects for the business. I can understand why, since I feel it has identified a sound strategy which could lead to improving financial performance in the long run.

For instance, it is focusing on reducing headcount in order to cut costs. This could improve its competitive advantage versus industry peers at a time when consumer confidence is weak and a number of other TMT companies are seeking to broaden their product offerings.

BT’s recent update suggested that it is making good progress in the delivery of its strategy. It made 2,000 roles redundant in the most recent quarter, and I feel a leaner and more financially flexible company could be able to generate improving financial performance in the long term.

Of course, no asset price ever goes up in perpetuity. As a result, some investors may be wondering whether the company’s stock price could come under pressure after such a large rise.

In my opinion, there could be volatility ahead for the company. A new CEO may make further changes to its strategy, and this could cause a degree of instability among investors who have experienced a number of strategy changes in recent years. The operating environment may also become more challenging as the Brexit process moves towards its conclusion.

However, since the BT share price has a P/E ratio of under 10, I think it still has a margin of safety even though it has made gains in recent months. Therefore, I’m cautiously optimistic about its long-term prospects, although in the near term it may exhibit greater volatility than many of its FTSE 100 index peers.

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