The BT (LSE:BT.A) The share price has risen 40% since I suggested buying the stock in early May. I just didn’t get around to it and missed what turned out to be a golden opportunity.
These things happen to investors, and I’m happy to take the good with the bad. However, with the stock at a one-year high, it’s time to re-evaluate BT as an investment opportunity.
Mexican support
According to a stock exchange announcement on June 12, Mexican magnate Carlos Slim – once the richest man in the world – has acquired a 3.16% stake in the FTSE100 Share.
Slim, whose family controls the telecommunications giant Mobile Americabought BT shares worth around £408 million (taking into account the share price at the time of filing).
The company’s shares had already risen 10% in May after CEO Allison Kirkby outlined her long-term vision for the company.
In the days following Slim’s purchase, the stock rose by another 10 percent. Several analysts said this was a vote of confidence in Britain.
Is BT still undervalued?
According to the 18 analysts covering the stock, BT is deeply undervalued. There are currently 14 buy or outperform ratings, two hold ratings, and two sell or underperform ratings. This would suggest that the consensus is a strong buy.
Then there is the average price target. According to the 18 analysts, the average share price is 1.92 pounds per share. That is a whopping 37.4% more than the current price.
Things are looking up
In recent years, the biggest problem for BT’s share price has simply been the lack of clarity about its future. The company has invested billions in fibre-to-the-premise (FTTP) connections, and that is hugely expensive. In fact, it costs around £85 million to equip 100,000 homes with FTTP.
The introduction also required BT to hire more and more staff.
It’s a big investment that puts pressure on earnings, and many analysts wonder whether BT could ever afford to pay back these huge costs.
Don’t get me wrong, this is still a problem. BT has huge debts and is in a relatively precarious position that could make the company vulnerable to disruptive technologies.
However, Kirkby’s vision for the company has added some optimism, with the new CEO planning to cut costs by £3 billion every year until the end of the decade to ease pressure on the company’s debt load and improve margins.
We also believe that BT has reached its peak in capital expenditure on FTTP deployment and that headcount and hence costs are likely to decline in the future.
In addition, FTTP is much easier to manage. Traditional copper cables wear out and break over time, and switching to fiber optic will require significantly fewer and cheaper maintenance staff.
I don’t think I missed my chance to buy BT shares, but I do have several stocks with potentially better value propositions on my radar.
The post “This Mexican billionaire thinks BT’s share price is cheap!” first appeared on The Motley Fool UK.
Further reading
James Fox does not own any of the stocks mentioned. The Motley Fool UK does not own any of the stocks mentioned. The views expressed in this article about the companies mentioned in this article are those of the author and as such may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
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