Image source: BT Group plc
In March I wrote about the B.T. (LSE:BT.A) share price drop. At that time, the stock had been down 26% for the year and had now risen to 34%. In March, I came to the conclusion that I wanted to see some type of catalyst before I became interested in purchasing it.
Nothing has materialized since then, so now is the time to broaden the horizon to the end of this year to see where things could end up.
Higher costs put pressure
Full-year results are due out in a couple of weeks, and this will likely be a key driver of the share price both in the immediate term and over the coming months.
Obviously, it's impossible for me to predict what's going to come out. However, I can look at recent earnings reports to get an idea of where things currently stand. The February trading update reiterated the message from other statements that the business is at a stage of building the foundations for the future.
What this really means is that costs are high at the moment as it focuses on building and upgrading customers to 5G and full fiber broadband networks.
This will generate benefits in the future, but I don't see this helping financially in 2024. Therefore, for investors who focus on short-term results, I can't see them buying shares in the short term. From that angle, I struggle to see the share price rising above 104p by the end of the year.
Close up of opening the hatch
At 104p, the share price is close to the 52-week lows of 101p from earlier this year. The stock hasn't traded below 100p since 2009, so this is a really key price to keep an eye on. Although investors use a lot of fundamental analysis to make a decision about what to buy and sell, it is true that psychological prices do influence us.
Put another way, 100p is a key level partly because it is a round number and has three digits. If it falls below here, it could signal a further decline as some investors may decide to throw in the towel and have used the 100p as a line in the sand.
A lower continuation
I expect the stock to finish the year below 100p, but it's hard to pinpoint an exact level. Based on the half-year results and forecasts, revenues and profits are likely to remain approximately the same as the previous year.
Because of this, I would expect a slow and steady decline in price until the end of the year. Using the remaining seven months and past performance over the previous 12 months, this would equate to a further 20% drop, putting the stock at around 83p.
In my opinion, there are risks. The main one would be a surprise outperformance in the upcoming results. Another risk would be that the benefits of the launch arrive sooner than expected. This could cause some value investors to buy.
I'm happy to change my opinion if something unexpected happens, but for now I don't see a compelling reason to buy BT shares.
