Will BT’s share price recover in 2021?

first_imgWill BT’s share price recover in 2021? Get the full details on this £5 stock now – while your report is free. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment. FREE REPORT: Why this £5 stock could be set to surge Our 6 ‘Best Buys Now’ Shares Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore 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. BT (LSE: BT.A) shares haven’t performed well in recent years. Its share price has shown signs of life in 2021, rising from 135p to 170p. However, over a five-year timeframe, the stock is still down about 60%. That’s a disappointing result for long-term holders.Can BT’s share price recover in 2021? Let’s take a look at the outlook for the FTSE 100 telecommunications stock.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…BT shares: can they bounce back?Looking at BT today, I’m cautiously optimistic on the outlook for the share price. There are several reasons why. The first is that management appears to be relatively confident about the future.In its full-year results for the year ended 31 March, BT advised that a number of uncertainties (the Wholesale Fixed Telecoms Market Review, the 5G spectrum auction, its triennial pension valuation, etc) have now been removed. It also said that after a number of years of tough work, it’s now pivoting to “consistent and predictable growth.”Of course, at this stage, there’s no guarantee BT will achieve the growth it’s talking about. The optimism from management is encouraging, nevertheless.Secondly, broker sentiment towards the stock has improved recently. In late March, for example, BofA Global Research upgraded BT shares to ‘buy’ from ‘neutral’, citing the stock’s attractive valuation and expectations for growth. BofA also raised its price target to 200p, from 160p. More recently, on 6 May, Barclays raised its price target to 190p, from 170p.Zooming in on BT’s valuation, it’s certainly low. Currently, BT sports a forward-looking price-to-earnings (P/E) ratio of about 8.1. That’s well below the FTSE 100 median of 16.8. If BT can execute on its plans, we could see its valuation increase. Finally, it’s worth noting that CEO Philip Jansen bought 1.25m BT shares last week (spending about £2m). This is very encouraging, in my view. Insiders don’t buy company stock if they think the share price is set to go down. Clearly, Jansen – who’s likely to have a good read on the company’s performance – is optimistic in relation to the prospects for BT shares.Putting all this together, I think there’s certainly a chance that BT’s share price could continue to recover in 2021 and beyond.Should I buy BT today?Having said that, BT isn’t a stock I’d buy for my own portfolio today. One reason is that BT hasn’t been a very profitable business. Over the last three years, its return on capital employed (ROCE) – a key measure of profitability – has averaged just 7.5%. That’s quite low. Over the long term, a stock’s return tends to be quite similar to its ROCE. This means that, in the long run, BT shares aren’t likely to generate strong returns.Another reason is the company has a weak balance sheet. At 31 March, it had net debt of £17.8bn on its books. This adds risk to the investment case. Finally, BT’s dividend track record’s patchy. I like companies that have good long-term dividend growth track records.Overall, I just don’t see BT as a ‘high-quality’ company. So, I’ll be leaving the stock alone for now. All things considered, I think there are much better stocks I could buy.center_img Simply click below to discover how you can take advantage of this. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Edward Sheldon, CFA | Thursday, 20th May, 2021 | More on: BT-A Enter Your Email Address Image source: Getty Images. See all posts by Edward Sheldon, CFAlast_img