The last six months have been positive for the BT Group plc (LON:BT.A) (BT.A.L) share price in my view. It has risen from 205p to 260p at a time when the FTSE 100 and many of its sector peers have seen their valuations come under pressure.
The future for the company, though, could be relatively uncertain in my opinion. As well as the risks facing the world economy and the UK economy as issues such as Brexit and a potential trade war continue, the business is set to experience significant change.
A new CEO often means a revised strategy from my experience. Although there is a chance that the current strategy will continue as per the changes made earlier this year in terms of reducing costs and focusing on the customer experience, a new CEO may seek to make their own mark on the company.
While this may not be a bad thing, I think that BT’s investors may be sceptical of further strategy changes. After all, the company has changed significantly in recent years, with it seeking to become a more dominant quad-play operator through acquisitions and various investments. However, it has not been able to deliver an improved bottom line in spite of the changes it has made. As a result, a revised strategy could lead to a larger margin of safety being applied by the stock market in my view.
As well as this, the prospect of declining EPS in the current year and next year could mean there is a lack of a clear catalyst to push the company’s share price higher. Although it still has a P/E ratio of around 10, investors may continue to demand a margin of safety versus sector peers given its falling levels of profitability.
Therefore, I’m unsure about whether the next six months will be as positive for the BT share price as the last six months have been. In the long run, though, I believe that a low valuation and what I view as a sound strategy could lead to further recovery, but it may take some time for this to be successfully delivered.