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BT and Vodafone shares among the FTSE stocks to watch in April

When the FTSE 100 crashed in March, it left companies and investors reeling. Some have shown signs of share price recovery; could this continue in April?

Vodafone Source: Bloomberg

Telecommunications companies should be more robust than most during the economic and social turmoil created by the coronavirus pandemic. While several consumer demands have reduced, the desire for connectivity has surged.

Policies of social distancing have placed a greater emphasis on mobile and broadband networks. This logic indicates that BT Group (BT.A) and Vodafone (VOD) should be among the stronger performers on the FTSE 100 as the pandemic runs its course.

However, that logic may be too simplistic during the ever-changing circumstances created by the pandemic. With a multitude of factors affecting share price and a lack of precedent for this situation, is it possible to forecast growth for BT and Vodafone stocks in April and beyond?

Some recovery following FTSE 100 crash, but is there more to come?

BT share prices sank as low as 107.3p on 12 March, levels not seen since the financial crisis of 2008. The telecom giant recovered from that recession, posting steady growth to trade close to £5 in the back end of 2015. Since then, BT shares have mirrored that pattern with a steady decline.

In the weeks before the pandemic was declared, BT stock was trading at a similar level to 2011. The telecom giant, therefore, headed into the pandemic from a position of relative weakness, although investors will be optimistic that the unique conditions created by social distancing allows BT stock to rediscover its upward trajectory.

BT shares were trading at 122.3p on 8 April, a promising recovery from that March nadir. It is too early to declare this a renaissance, but it displays a resilience uncharacteristic of BT stock in recent years. Vodafone's lowest ebb came on 16 March with share prices closing at 98p, but, like BT, the company has rebounded to finish 8 April at 110.84p.

Where next for the BT and Vodafone share prices?

As long as the two telecom companies can continue to satisfy the increased demand placed on mobile and broadband networks, then BT and Vodafone shares may be able to regain further ground lost during the FTSE 100 crash. Yet there is still reason to be wary of Vodafone and BT's scope for immediate growth, particularly in the case of the latter.

In a pre-coronavirus development, the government capped the use of Huawei tech in BT's 5G networks, costing the telecom giant £500 million over a five-year period. There's never a good time to be £500 million down, but a global pandemic surely ranks as one of the worst. While BT shares may climb back to their levels from the start of 2020, there is little evidence to suggest that April will mark the start of a long-term resurgence.

High demand for network access will keep both Vodafone and BT busy in April and beyond, with Vodafone reporting a 30% rise across its UK networks in mid-March. That demand has potentially plateaued, given there is not much scope for self-isolation measures to become much stricter in the coming weeks and months.

While consistently high network demand is encouraging for BT and Vodafone’s business, a prolonged lockdown will have detrimental effects for several other FTSE 100 companies. The appeal of telecom shares in April will largely depend on whether BT and Vodafone can significantly outperform the benchmark levels of the FTSE 100, or whether they will be dragged down by further crashes.

April could be a crucial month in gauging the long-term viability of BT and Vodafone shares. If they can defy bearish market behaviour and emerge from April in healthy shape, that may demonstrate an ability to post further rises as the pandemic endures.

How to trade telecoms shares

Where do you stand on telecom stocks amid the global pandemic? With IG, you can go long or short with derivatives. Follow these simple steps:

  1. Create an IG trading account on our world-leading platform
  2. Search for ‘Vodafone’, ‘BT’, or any other stock in the search bar and select it
  3. Choose whether to go long (buy) or short (sell) and enter your position size
  4. Confirm the trade

Remember you can invest and own shares with IG too. UK stocks like BT and Vodafone cost £3 commission if you’ve traded three or more times in the previous month, or just £8 otherwise.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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