BT Group (LSE:BT.A) shares have been on a serious winning streak. Even in the last 12 months, the telecommunications giant has seen its share price jump another 36%. And the stock is now sitting at its highest level in over five years!
But that naturally raises the big question: can the momentum keep going, or has the easy money already been made? Let’s find out.
What’s driving the rally?
A big part of BT’s outperformance comes down to the market becoming more comfortable with the business itself.
After spending years in the doghouse, new management’s finally started tackling the group’s stretched financials and operational challenges. And this progress in establishing better cost discipline and superior execution is starting to deliver tangible results.
Its latest trading update revealed stronger-than-expected performance for its Openreach arm, while the rollout of its fibre optic network has now reached 21.4 million premises, on track to hit 25 million by the end of the year.
That matters because BT is now entering into the later stages of its full-fibre buildout. And with other large capex projects like 5G infrastructure also surpassing their peak spending periods, the firm’s free cash flow appears set to grow over the coming quarters.
In other words, management could soon have far greater financial flexibility to pay down its long-standing debt, reduce pension deficits, and bolster dividends. With that in mind, it’s no wonder BT shares are on the march.
But can the FTSE stock continue to climb?
A mixed bag of opinions
Despite the encouraging progress made, opinions surrounding BT shares are pretty diversified, with no clear-cut overall rating.
For example, JP Morgan recently lifted its target price to 310p, while Bank of America set a 282p target. With BT shares currently trading near 231p today, that clearly signals confidence in the business and its ability to continue implementing better cost controls, superior network quality, and stronger cash generation.
Yet at the same time, the team of analysts at UBS are far less optimistic, placing their share price target at 175p and even issuing a Sell recommendation. And this cautious stance isn’t entirely unjustified.
BT’s days of heavy capital investment are far from over. And while cash generation may improve in terms of bringing down leverage, that also means there’s less capital available for reinvested in growth, potentially creating opportunities for its rivals to take market share.
Don’t forget the firm operates in a fiercely competitive market. So who should investors listen to?
Risks and rewards
BT still has huge scale, a dominant position in UK telecoms, and the potential to keep unlocking value as execution improves. Yet at the same time, the telecoms industry is demanding, and BT has a long track record of disappointing investors, although admittedly under previous leadership.
Overall, BT shares look far more interesting today than they have in years. The company still has a long road ahead, but it’s a story that’s getting increasingly harder to ignore.
Personally, I’m not ready to pull the trigger just yet. But for those looking to invest in a turnaround story that’s still in its early innings, BT shares could be worth a closer look.
Should you invest £5,000 in Bt Group Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
