HOT STOCKS: Analysts claim BT is seriously undervalued
WHAT IS HAPPENING?
Mexican billionaire Carlos Slim this week took a 3.2 percent stake in BT through his family business.
Slim, 84, made his fortune through America Movil, the largest mobile group in Latin America. His arrival came as BT boss Allison Kirkby, who took over at the telecoms giant in February, is implementing a major turnaround plan.
WHAT ARE BT’S PLANS?
Unveiling its annual results last month, Kirkby said BT aims to save a further £3 billion a year by the end of 2029 by modernizing processes and shutting down old networks.
She said the FTSE 100 group was exploring “options across our entire international footprint”, including partnerships and the sale of parts of the business. But BT said Britain was its main focus.
Despite the cost-cutting plan, Kirkby said there was “no change” to his proposals to cut almost half of its 130,000 workforce by the end of the decade, including around 10,000 to be replaced by artificial intelligence.
And in an effort to charm investors, BT increased its dividend for the year by 4% to 8% per share.
WHAT DO SHARES DO?
BT shares have recently rallied as investors applauded Kirkby’s turnaround efforts and Slim’s investment in the group.
The stock is up 6 percent in the past week and is up 11.1 percent since the start of 2024.
But BT shares are still down since their peak in 2015, with analysts claiming they are seriously undervalued.
SHOULD YOU BUY SHARES?
Many experts have suggested that this could be a good time to strike. Karen Egan, telecoms expert at Enders Analysis, said BT could be a good choice for investors looking for long-term profits.
While she acknowledged that ‘it won’t be an easy year for the industry’, she backed BT’s efforts to boost profits.
But the sector has been plagued by poor shareholder returns, meaning investors looking for value for money should tread carefully.
WHY ARE TELECOM COMPANIES UNDERVALUED?
Telecom groups struggle to attract shareholders due to high debt levels and large corporate structures, which are expensive to maintain.
They are also under pressure to keep updating their infrastructure – or risk falling behind rivals.
This backdrop has only worsened in an era of high interest rates and inflation. The UK market is also undervalued compared to foreign indexes, making it even harder for companies like BT and Vodafone to thrive.