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Have the B.T. (LSE:BT.A) The recovery has finally started and will the share price continue to rise?
Maybe. The full annual report filed on May 16 appears to have kicked off a turnaround for the stock after years of decline.
It seems CEO Allison Kirkby's words had an effect.
The telecommunications company has exceeded the maximum capital expenditure related to the rollout of full fiber broadband. On top of that, the £3bn cost and services transformation program was completed a year ahead of schedule, Kirkby said.
A positive outlook
There was no way to stop the optimism: “We have reached the turning point of our long-term strategy”.
What does that mean? Well, Kirkby said that directors now have the “trust” to provide new guidance. BT standby “significantly” higher near-term cash flow and it looks like free cash flow will increase “more than double” for the next five years.
Looking at the next steps of the business, he said that the intention is “speed up” modernizing operations. The directors also intend to look for ways to “optimize” Global Operations.
Kirkby believes the strategy will help achieve “significant” growth in the coming years.
Is this really so? Has BT finally turned things around after a long and torrid time for the company and its shareholders?
Maybe. But it's worth noting that the adjusted figures for the business year to March 31 were a bit disappointing. Revenue was broadly flat year-over-year, earnings were down 16%, and net debt was up nearly 3.3%.
However, investing in stocks is about looking forward and not back. Perhaps that's why the stock price soared when the report hit the news.
But what if you had invested £3,000 in shares three months ago? How much would she have now?
No dividends have been distributed during the period, so all profits will come from the rising share price.
At the beginning of March, you could have bought around 2,830 shares for around 106p each. Fast forward and those shares are now changing hands for around 133p.
Ignoring trading and execution costs for this example, my profit would have been around 25% or £750. Therefore, you would now have an investment of approximately £3,750.
Why You Would Consider BT Stock Now
Not a bad return for such a short period. I can understand why it may be difficult for new investors to consider BT shares now, after the sharp and rapid rise.
After all, investors' initial optimism may fade and the stock price could decline. Furthermore, the company may struggle to live up to its high expectations in the coming years. One area of concern is the huge amount of debt on the balance sheet – BT still carries a lot of risk.
However, I think it would be a mistake to avoid the company now. Often, companies and stocks actually enter new and lasting phases of prosperity and growth after those initial strong price reversal movements; This is in the territory of positive changes in business fundamentals.
My plan would be to focus on BT now and do some further research and consideration with a view to buying some shares long term.
