BT Group: Here are four reasons to sell the shares11 Nov 2024 16:46
Proactive Investors - UBS has reaffirmed its 'sell' rating on BT Group PLC (LSE:LON:BT.A), setting a price target of 115 pence, after the telco's second-quarter results revealed challenges in revenue growth and rising expenses.
The first key issue for BT is weaker-than-expected revenue in its Business division, which has led the company to adjust its fiscal year 2025 forecast to a 1-2% revenue decline.
UBS also pointed to increased staff costs following recent UK budget changes. These changes are expected to add £100 million in expenses for fiscal year 2026, potentially impacting BT’s profit and free cash flow, as well as consensus expectations for the company’s earnings.
BT has stated it will work on cost efficiencies to manage this increase.
Meanwhile, its fibre rollout via Openreach remains a key area of focus. The company has expanded its fibre-to-the-premises (FTTP) build target to 4.2 million homes this year, aiming to retain broadband customers amid growing competition.
While the company has managed to contain capital expenditures this year, UBS warns that the accelerated rollout could increase spending requirements in future years, putting added pressure on free cash flow.
Additionally, BT is facing an impending court decision on a £1.3 billion class-action lawsuit related to alleged historical overcharging.
UBS views this legal uncertainty as a potential overhang for the stock, as investors await further clarity on possible financial liabilities.
In short, the Swiss bank's analysis suggests BT may face limited growth potential in a challenging market landscape.
The stock was trading 0.8% higher in the afternoon session at 141.18p.
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