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Five years ago, I turned my nose up at the BT Group (LSE: BT.A) share price. It had been on a lengthy slide, debt was piling up, and I saw the dividend under pressure.
But in the past five years, BT shares have climbed 80%. That’s enough to turn £5,000 into £9,000 today in capital growth. And we’d have had another £1,500 in dividends — so more than a double-your-money result.
Falling back
That’s a great turnaround. But since a peak in July, the BT share price has fallen 18%. Is it time to go back to my old scepticism, or is this a new buying opportunity?
The cause, it seems, is that a handful of brokers have scaled back their recommendations on the stock. And right now, there are almost as many analysts rating BT a Sell as a Buy.
On top of that, analysts have been gradually cutting back on their revenue and earnings forecasts over the course of 2025. And that’s not just for the current 2025-26 fiscal year. No, estimates for 2027 and 2028 are also softening.
Optimism over
So what’s happening to all the optimism generated when CEO Allison Kirkby told us back in 2024 that BT had “passed peak capex on our full fibre broadband rollout and achieved our £3 billion cost and service transformation programme a year ahead of schedule?”
It was a key milestone. But I can’t help feeling investors might have since taken a step back to reconsider what it might mean for the long term. High-tech telecoms is all about growth, right? Maybe not. BT’s revenue has been largely flat for a while, and is expected to remain that way for a few more years.
We all have ever-faster internet connections and ballooning 5G data availability. But we’re not paying much more for it.
The ‘passed peak capex’ thing is good, and should mean more free cash heading for investors’ pockets instead of further tech rollout costs. But can it really mean anything more than a breathing space?
Hello 5G, here comes 6G
We’ve recently heard news from Nvidia that it’s forming new partnerships to develop the next generation, 6G, of mobile communications. The company’s lining up with Nokia, investing $1bn in the company, and others.
One round of capital expenditure is slowing. But there’s always be another one coming. Leading-edge telecoms is unavoidably like that. So I’ve turned bearish on BT again, have I? Actually, no.
Valuation
I still think the BT share price represents fair value, with a forward price-to-earnings (P/E) ratio of around 13. Adjusting for net debt of around £20bn would pretty much double that figure for an enterprise value P/E. But it’s a far cry from some tech stock valuations.
If BT can keep the cash flow going, keep servicing its debt comfortably, and still be able to maintain dividends yielding 4%-5%, I think it could be a long-term winner.
Risks from debt, competition, slow revenue growth, and future capital expenditure are all real. But I still think investors looking at the next five years and beyond should consider BT at today’s share price.
