During the first semester of this year, the BT (LSE: BT.A) the stock price seemed to be soaring. Between the beginning of January and the end of June, the stock brought in more than 50%.
However, since then, investors have turned their backs on the company. Since its 52-week high at 207p, printed in mid-June, the stock has lost almost a third of its value.
So what happens to the BT stock price? And will this trend change anytime soon?
BT has always had problems pushing back its competitors. In recent years, competitors have taken market share from the incumbent because it hasn’t spent enough to get customers to stay.
Customers have found better deals and better service elsewhere.
This is starting to change. BT is investing more and focusing on what it does best, providing broadband and telecommunications services.
To this end, it has been reported that the DAZN streaming service is in advanced talks to purchase BT Sport. The sale of this division has been rumored for some time and I think it is the right move. It will allow the group to focus on its broadband fiber and EE mobile telecoms business.
Unfortunately, this transition comes at a cost. The group will invest billions in the coming years to expand its high-speed fiber network. This seems to be one of the reasons why the BT stock price has fallen. Investors appear to be concerned about the impact this spending will have on profitability and shareholder returns.
At the same time, there has been speculation that Virgin and Sky are about to reach an agreement to work together in the UK broadband and pay-TV market. This would create a formidable competitor for BT. This would almost certainly have an impact on the group’s ability to retain customers.
BT Stock Price Outlook
Considering all of the above, I think it’s easy to see why investors have become fearful. The next few years will be a time of transition for BT, and it’s impossible to say at this point what the business will look like once its transformation is complete. Some investors may not want to stay and find out.
However, I believe the company has the size and scale to harness the market. It may be facing increasing levels of competition, but now BT is focused on improving customer service and expanding its network, it has the resources to fight against its competitors.
As such, I think the BT share price offers an interesting opportunity at current levels. That’s why I would buy the company for my wallet as a turnaround game.
I realize that this may not be suitable for all investors as it is impossible to say at this point whether BT will emerge victorious. The group will face considerable challenges over the next few years. Some investors may not want to participate in this turnaround.
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Rupert Hargreaves has no position in any of the stocks mentioned. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.