BT Q2 earnings: what next for the share price?

Challenging market conditions pushed the telecom provider’s shares to a four-year low in August, but the stock has gained more than 30% ahead of its Q2 results next week after unveiling its latest turnaround strategy.

When is BT’s results date?

BT will unveil its Q2 results on October 31.

BT’s results preview: what does the City expect?

BT faces a myriad of challenges, some created by the market and others by itself, with the company's balance sheet laden with debt at a time when competition among British telecom providers is high.

However, earlier this month, BT published its turnaround strategy which aims to ‘boost’ its UK business. The news was well-received by investors, sending its stock more than 30% higher to 206p, after hitting a four-year low of 158p in August.

Openreach, BT’s broadband and telephone network unit, remains a priority for the group. However, its margins are being squeezed by industry regulator, Ofcom. Consumers stand to benefit from the watchdog’s close eye on broadband providers, with it helping to improve accessibility to high-speed internet connections at lower prices at the expense of limiting returns for investors.

BT remains on track to hit its full-year guidance, with the company looking to deliver adjusted EBITDA of between £7.9 billion - £8 billion, along with free cash flow of between £1.9 billion - £2 billion. However, the company remains under significant pressure from multiple angles and its turnaround strategy will need to provide tangible results if its stock is to continue to rise.

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BT: Technical Analysis

BT shareholders have had a tough time of it recently, with the stock losing 49% since the £4.11 peak back in November 2015. That decline has been alleviated to some extent by the 32% rally seen over the course of the past two-months.

However, we are certainly not out the woods yet, with that rally taking place within a wider downtrend that continues to hold. The weekly chart below highlights the two phases of this decline, with price having recently broken upwards to begin retracing this recent £2.48-1.57 selloff.

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It is certainly clear that we are seeing a greater number of questions asked of this downtrend, with the two-year period of consistent selling now giving way to a 17-month period which has now seen two major rallies.

For now, the downtrend remains intact, with the stock likely to see the sellers come back into play within the £2.13-2.26 Fibonacci retracement zone. However, should we see price break through the £2.48 peak from November 2018, it would provide us with a wider bullish reversal signal.

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