Happy Halloween! Alas, it’s been a pretty spine-chilling October for shareholders in BT Group (LSE: BT.A), whose stock nosedived this month. Indeed, the BT share price has been the second-worst performer in the FTSE 100 index since 30 September. So what went wrong? And might this popular stock bounce back in November?
The BT share price’s slumps and slides
Almost five years ago, on 13 January 2017, the BT share price closed at 391.75p. Alas, the stock has never seen such highs since. Here are its year-end closing levels since then: 2017: 271.7p | 2018: 238.1p | 2019: 192.44p | 2020: 132.25p
As you can see, the share price has been in freefall for most of the past five years. Indeed, at its 2020-21 bottom, the stock collapsed to an intra-day low of 94.68p. The last time I remember BT being under £1 was during the depths of the global financial crisis of 2007-09. What’s more, this stock has been a loser for months, ever since it peaked in the middle of the year.
At their 2021 peak, BT shares hit an intra-day high of 206.7p on 23 June. On Friday, the shares closed at 138.93p, valuing the group at £13.8bn. They’ve dropped 13.1% this month, versus a 2.1% gain for the FTSE 100. Also, the stock has slumped 20% over three months and lost 15.8% of its value over six months.
Then again, BT stock is up 36.6% over one year, versus a 28% gain for the FTSE 100. But it’s been a real long-term loser, collapsing by 61.6% since October 2016. Over the same period, the FTSE 100 has eked out an 8.1% gain. So BT has been a dog of a stock for half a decade. Yikes.
Would I buy BT after recent weakness?
On 17 June, the share price closed at 205.6p. Today, I can buy a BT share for almost 67p less — that’s a discount of 32.4%. As a veteran value investor, I’m always on the lookout for beaten-down shares in otherwise solid companies. Indeed, back on 13 May this year, I said that I would buy BT stock at a price of 160p. With the shares now over 21p cheaper, have I changed my mind, or will I stick with my original view?
Growing up as a working-class lad from the North East, I’ve always loved a bargain. And I suspect that, at this newly discounted price, BT still fits my bill as a ‘fallen angel’ with growth potential. Right now, BT shares trade on a price-to-earnings ratio of 9.5 and an earnings yield of 10.5%. What’s more, BT restored its cash dividend for this fiscal year, after cancelling it in May 2020 (the first suspension in 36 years). With a full-year dividend of 7.7p expected for 2021-22, this equates to a dividend yield of 5.5% a year. That’s comfortably ahead of the FTSE 100’s forecast dividend yield of 4% for 2021.
I don’t own this stock today, but I would buy at the current BT share price. However, BT has had a tough few years — and probably faces a few more, too. But looking ahead, BT’s massive pension contributions are set to fall and it fared well in the latest Wholesale Fixed Telecoms Market Review. Nevertheless, I’d expect continued price volatility from this stock in 2021-22. Meanwhile, I await BT’s latest quarterly results on 4 November.
Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
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