The BT share price has plunged: is it time to buy?

The BT (LSE: BT-A) share price has performed disappointingly of late. After reaching 205.6p in mid-June, it’s fallen 24% to 156.15p. It’s not the only stock in the telecoms sector investors have recently shunned.

Gamma Communications (LSE: GAMA) made an all-time high of 2,335p earlier this month but has dropped 21% to 1,856p. Should I buy BT and Gamma at these discount prices?

Contrasts in the BT and Gamma share prices

While both stocks have seen recent heavy falls, their performances have diverged markedly over longer periods. Just look at the table below.

Investors in BT have suffered a falling share price for years. By contrast, Gamma shareholders have enjoyed spectacular gains. However, past performance is not necessarily a good guide to future returns. And it’s the future I’m interested in as a potential investor today.

Gamma’s long growth runway

Gamma was founded in 2002 and listed on AIM in 2014. It’s established itself as a UK leader in the fast-growing market of Unified Communications as a Service (UCaaS). Its suite of products enables employees to collaborate with colleagues and communicate with customers, whether in the office, at home or on the go.

The company is now looking to conquer the large European market. Europe is behind the UK in the adoption of cloud-based UCaaS and Gamma sees a long-term growth opportunity.

Is it time to buy Gamma?

In its recent half-year results, the company said it has “begun to successfully knit together our desired Western European footprint.” However, I think the market may have been expecting higher growth from Europe.

For me, it’s early days in the expansion and the long-term growth story remains intact. Certainly though, there’s a risk the company may not be able to replicate its UK success abroad. Another risk is that competition from new entrants in the attractive UCaaS market could pull down profit margins in the sector.

Nevertheless, due to the size of Gamma’s growth opportunity, and despite an earnings multiple in the mid-30s, I’d be happy to buy a slice of the business after the pullback in the share price.

BT gets a new chairman

BT needs no introduction, being a FTSE 100 blue-chip with a market capitalisation of £15.5bn at its current share price. Earlier this year, chairman Jan du Plessis announced he would be stepping down.

According to Sky News — denied by BT — chief executive Philip Jansen had given the board an “either-he-goes-or-I-go” ultimatum. Jansen was reportedly “frustrated with the speed at which BT was taking key strategic decisions.”

Whatever the ins and outs, the company announced last month that experienced business-transformation specialist Adam Crozier will take over as chairman on 1 December. I think Crozier is a good appointment.

Is the BT share price good value?

I like BT’s modernisation plans and investment in strategic growth areas. Clearly, there’s execution risk in transforming a business and no guarantee investment will pay off. Net debt of £18.6bn could also be a hindrance and risk.

However, with Jansen “confident that BT is on a path to growth,” and the arrival of Crozier as chairman, I’m hopeful the company — and its share price — can do well. The recent fall has left the stock trading at less than nine times earnings, and I’d be happy to buy it for the long term.