BT shares remain low but will major shake-up lead to 2021 recovery?

The BT share price remains low. However, with chairman Jan Du Plessis leaving due to a major shake-up by CEO Philip Jansen, analysts are starting to see some potential in BT shares, even with threats of industrial action looming.

  • BT shares drop 2.43% on Tuesday, April 6
  • Analysts are bullish on BT share price.
  • Shake up helping recovery but industrial action remains a threat.
  • Want to trade BT shares? Open an account today

BT (BT.L) shares opened at 157p on 6 April, but quickly dropped 1.08% to 155.3p within the first hour of trading. The stock continued to trend lower as the day wore on, closing the session down 2.43% at 152p per share.

This pattern won’t be unfamiliar to those invested in the telecommunications company. The BT share price has increased from a low of 98.58p over the last 12 months, however, its value is still 65% lower than it was 5 years ago, when the stock traded around 437p.

From this perspective, the picture remains fairly bleak. However, close to £1 billion worth of debt has been scrapped in 2020-21, partly due to the recent restructuring at the hands of their CEO, Philip Jansen.

What factors are bringing down the BT share price?

BT has net debt of £17.3 billion, something that also weighs heavily on its share price, especially after some substantial percentage dips at the beginning of 2020. However, the company’s 2021 Q1 trading update reported that £940 million worth of debt had been cleared over the last year. This is due, in part, to the restructuring effort by CEO Jansen and despite criticism from Du Plessis. The former chairman was openly critical of Jansen’s cost-cutting efforts during the pandemic.

He saw the decision to cut thousands of jobs and reduce the number of offices from 300 to 30 as treating people ‘with contempt’ during a tough time. The friction resulted in Du Plessis leaving BT in May as Jansen held his position. Even though the BT board denied that Du Plessis left because of the rift, discontent remains within the company.

Threats of a strike loom large, but Jansen has said he hopes to avoid industrial action while continuing to reduce operating costs. It is worth noting that the threat of a strike caused the company’s share price to plunge by almost 8% in Q3 2020/21.

At the same time, the CEO is focused on a £12 billion investment in full-fibre connections. Ofcom recently declined to impose caps on BT’s connections, which means its subsidiary, Openreach, will be able to create 20 million fibre-to-the-premises connections by the late 2020s. These connections are used to supply BT broadband, but they’re also sold to other suppliers.

Why are analysts still holding out on BT shares?

It’s this dominant position in the UK’s broadband market that’s fuelling bullish sentiments among analysts.

Credit Suisse, Barclays, and JP Morgan all reiterated their Buy ratings in March. Of the three, Barclays is the most cautious, with a BT share price target of 170p, while JP Morgan’s analysts are slightly more optimistic at 175p. Analysts at Credit Suisse believe BT shares could hit 200p in the coming months - that would be a 31% increase on Tuesday’s closing price.

The end of Covid-19 restrictions in the UK could also help to increase BT Sport revenue as people filter back to pubs and venues. However, Jansen’s actions aren’t guaranteed to be successful.

Analysts are bullish, yes, but the threat of strikes could hamper the BT share price recovery. Jansen needs to find a balance between cutting costs and appeasing the company’s 120,000 employees. The sentiment among analysts is that BT shares have value at their current price, but the question is whether that will remain the case if Jansen continues to make what some see as 'damaging' structural decisions.

Will BT shares recover or is there turbulence ahead?

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