This year has turned out to be ‘a tale of two halves’ for the BT Group plc (LON:BT.A) (BT.A.L) share price. By the end of May it had fallen to around 203p, having started the year at 270p. Since then, though, it has risen to its current level of 254p.
Interestingly, its shares have done opposite to the FTSE 100 in that regard. The index gained until May, before falling heavily since then.
BT, however, continues to face a number of risks in my view which could hold back its stock price performance. One possible risk is the strategy change it is trying to implement. Investors seem to be backing it, with the company’s shares rising since it was announced earlier in the year.
While it seems to be making progress in areas such as headcount reductions, there are no guarantees that it will lead to EPS growth over the long run. In fact, there have been a number of strategy changes in the past from the company, yet it has recorded three successive years of declining EPS. And with a further two years of falling EPS expected in the current year and next year, investor sentiment may be improving too quickly in my opinion.
Alongside this, BT is due to see its new CEO start work next year. This could lead to further changes which may cause a degree of instability. And with the company set to face greater competition as an increasing number of firms diversify their product offerings across the TMT sector, I feel that there could be further challenges ahead for the stock.
As a result, I’m cautious about the stock’s near-term outlook. In the long run, I believe that a P/E ratio of around 10 and what seems to be an improving strategy could deliver stronger financial performance. But in the near term, there may be further volatility ahead.