UK Markets open in 6 hrs

Tempted by BT’s share price? Here are two things you should know

Edward Sheldon, CFA
Screen of price moves in the FTSE 100

It’s fair to say the performance of BT (LSE: BT.A) shares has been disappointing recently. This year, BT’s share price is down over 40%. Meanwhile, over the last three years, it’s down over 60%.

If you’re tempted to buy BT shares after this drop in the share price, there are a few things you should know. Below, I’m going to share with you two interesting things I’ve discovered about BT while analysing the FTSE 100 stock recently.

BT share price: brokers are lowering their targets

The first thing I want to highlight about BT shares is that, since the company issued its full-year results in early May and suspended its dividend (both its final 2019/2020 dividend and all dividends for 2020/2021), a number of brokers have reduced their target for BT’s share price.

I’ve listed the recent price target downgrades:

  • 11 May, Citigroup, target price lowered to 110p from 120p

  • 11 May, Barclays, target price lowered to 120p from 130p

  • 18 May, Jefferies, target price lowered to 220p from 260p

  • 27 May, Barclays, target price lowered to 115p from 120p

  • 23 June, Credit Suisse, target price lowered to 190p from 270p

I see this activity as a bearish signal. In my view, it’s not a good sign that multiple brokers are downgrading their price targets for BT shares.

I’ll also point out that analysts have lowered their earnings forecasts both for this year and next year quite significantly over the last few months. For example, over the last three months, the consensus earnings per share forecast for this year has fallen nearly 15%.

Again, I see that as quite bearish. This kind of sentiment towards the share price and near-term earnings could hold the stock back, in my view.

Insiders are loading up on BT.A shares

It’s not all bearish news though. If we look at what company insiders at BT have been doing recently, in terms of buying and selling shares, the case for BT looks more promising.

Since mid-May, seven board members at BT Group, including CEO Philip Jansen and chairman Jan Du Plessis, have purchased BT shares. And some of these purchases have been very substantial too.

For example, Jansen’s purchase of 1.834m shares on 13 May cost him over £2m. Meanwhile, Du Plessis’ purchase of 500,000 shares on the same day, cost the chairman £530,000. These two purchases increased their personal holdings by 53% and 166% respectively.

I see that kind of insider buying activity as quite bullish. The fact that these top-level insiders are willing to spend that kind of money on shares suggests they’re confident about the future and believe the FTSE 100 stock is undervalued.

Would I buy BT today?

Would I buy BT shares today in light of these developments? Weighing everything up, the answer’s no. The fact that insiders are buying is encouraging. However, I think the company still has a long way to go, in terms of turning things around.

All things considered, I think there are much better stocks to buy right now.

The post Tempted by BT’s share price? Here are two things you should know appeared first on The Motley Fool UK.

More reading

Edward Sheldon has no position in any 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.

Motley Fool UK 2020