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The BT Group (LSE: BT.A) share price has hit a bump in the road. After spiking to 240p on 11 May, it’s dropped around 15% to 203p today.
The shares were hit by the UK government’s decision to block any attempt by Indian billionaire Sunil Bharti to increase his 24.5% stake, wiping out the takeover premium, and concerns that BT’s Openreach full-fibre operation is shedding too many customers. So is this a buying opportunity?
I dismissed BT years ago when it strayed far from its remit by getting involved in sports broadcasting. That was on top of having £20bn in debt and a burdensome company pension scheme. It also had to spend a hefty £15bn rolling out its Openreach full-fibre network. It just had too much on its plate.
How did this blue-chip bounce back?
Chief executive Allison Kirkby has revived the FTSE 100 company by cutting costs, streamlining the business and beating a dignified retreat from sports. Full-year net income has been rising at a steady, if unspectacular pace:
- 2026 – £8.23bn
- 2025 – £8.21bn
- 2024 – £8.10bn
- 2023 – £7.93bn
- 2022 – £7.58bn
Openreach spend has peaked with BT anticipating 25m premises by the end of 2026. Capital expenditure is expected to fall by £1bn next year, and the free cash is flowing.
- 2026 – £1.51bn
- 2025 – £1.60bn
- 2024 – £1.30bn
- 2023 – £1.33bn
- 2022 – £1.39bn
The board is now guiding for £2bn of free cash flow in 2027, rising to £3bn by the end of the decade. That will hopefully allow it to start paying down some of that debt and maybe even reward investors with a share buyback or two. Kirkby is also executing a massive £1.5bn cost-cutting programme, and aims to slash the workforce. That said, I question whether AI will be as helpful on this front as she thinks. The tech has its limitations.
So what do the experts say?
The 15 analysts offering one-year share price forecasts produce a consensus target of 230p. If correct, that would see the shares climb a pretty decent 13.3% from today’s 203p.
Throw in the forecast yield of 4.3% for 2026 and the total projected return climbs to 17.4%. This would turn a £9,999 investment into £11,739. That’s not exactly Nvidia levels, but it isn’t too shabby either — if it happens. None of this is guaranteed, remember.
Of the 17 analysts giving stock ratings in the past three months, nine are buyers. Yet five rate BT a Strong Sell, which is a relatively high proportion.
- Strong Buy: 6
- Buy: 3
- Hold: 3
- Sell: 0
- Strong Sell 5
There are risks. While Openreach dominates, it faces tough competition from smaller, nimbler alt-net rivals. It lost another 192,000 lines in Q1, although on the plus side it did add 574,000 net new connections. The cost-of-living crisis is dragging on, which could force cash-strapped customers to shop around for cheaper providers.
I’m impressed by the BT transformation and the shares don’t look too expensive with a price-to-earnings ratio of 10.9. It’s still a work in progress, but it’s getting there and worth considering today. It’s not on my shopping list though.
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Harvey Jones does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
