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Has the BT (LSE: BT.A) share price raced ahead of itself? Possibly. The FTSE 100 telecoms giant is up another 7% in the last month. It’s now climbed 46% over 12 months and 68% over two years. That’s quite a turnaround for a business that was on its knees not so long ago.
BT’s debt had ballooned, capital spending was eating into profits, pension obligations loomed large, and it was getting squeezed by low-cost rivals. Yet there was one benefit to this. The shares looked dirt cheap with a price-to-earnings (P/E) ratio of five or six, and a juicy 7%+ yield. I kept it on my radar but never took the plunge. I wish I had.
FTSE 100 recovery star
Now it feels like a different beast. CEO Allison Kirkby has tightened operations, pressed ahead with job cuts, and ramped up digital delivery. Investors have taken notice.
First-quarter results, published 24 July, showed signs of easing up. Adjusted revenue dipped 3% to £4.87bn, with a slide in handset sales and weaker international trading. Reported pre-tax profit dropped 10% to £468m. None of that screams momentum and yet still the share price climbs.
BT says it’s still on track to meet its long-term targets. It’s seeing record demand for Openreach fibre-to-the-premises, with net adds up 46% to 566,000. Mobile subscribers rose by 41,000.
However, it’s spent a fortune building its fibre network and now it’s losing Openreach broadband lines at pace, down 169,000 in the quarter. That reflects both a weaker market and fiercer competition from small, nimble alt-nets.
Debt still weighs
The balance sheet still looks stretched. BT’s net debt is just shy of £20bn, roughly matching its annual revenues. The debt-to-equity ratio of 1.8 leaves BT vulnerable if interest rates stay higher for longer.
One risk is its exposure to struggling peer TalkTalk. BT’s reportedly owed large sums, and any delay in recovering them could hit profits. There’s talk of a possible takeover, but I’m not convinced that’s the right move, given TalkTalk’s falling customer base and £1.2bn debt pile.
Despite the share price surge, BT doesn’t look outrageously priced with a P/E of around 11. Income seekers may be disappointed though. The dividend yield‘s dropped sharply with the share price rise. The trailing figure is just under 4%, with modest projected growth to 4.18% by 2027. It’s still well covered by earnings, but no longer a high-yield play.
Dividend growth has slowed too. It rose 3.9% to 8p in 2024 and just 2% to 8.16p in 2025.
Too late for me
I thought seriously about buying BT some 18 months ago when it looked cheap and beaten up. I hesitated, thinking its problems might take longer to fix. The turnaround has come faster than I expected, and the share price now reflects that.
I don’t think the price is wildly overcooked. But with analysts’ median one-year target at 201p, slightly below today’s 207p, the easy gains may already have been made.
Anyone looking to build a balanced portfolio might consider buying. But I think there are better growth and income opportunities on the FTSE 100 today.
