Having reached a seven-year low of around 200p earlier in 2018, the BT Group plc (LON:BT.A) (BT.A.L) share price has recovered to trade at around 250p at the time of writing.
In the near term, I think the prospects for the telecoms company may continue to be uncertain. In my view, the operating environment for the business may prove to be relatively unfavourable.
Competition seems to be growing, with a number of TMT companies broadening their services into the quad play arena. Alongside this, the outlook for UK consumers seems to be challenging. Although wage growth is ahead of inflation, consumers seem to be adopting a cautious attitude ahead of Brexit.
Since the vote on Theresa May’s deal could apparently take place as late as the day before the UK is expected to leave the EU, I wouldn’t be surprised if there is heightened uncertainty ahead which impacts negatively on UK-focused stocks.
As well as a difficult external environment, BT is also seeking to cut costs and implement a revised strategy. A new CEO is due to start work in the New Year, and this may lead to further changes for the company after what has been a tough number of years. In fact, the last three years have all seen declines in the company’s profitability.
Therefore, I’m cautious about the near-term prospects for the stock at the moment. I feel that it has a sound strategy and a new CEO could make a difference to its long-term performance. But with what seems to be a difficult near-term outlook, I’m of the view that its stock price could be volatile.
In the long run, a P/E ratio of 10 may make the BT share price relatively attractive. A successful turnaround may be on the horizon, but between now and then there could be a period of intense uncertainty ahead.