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The BT share price has tumbled back to its 52-week low. Time to buy?

Middle-aged white man pulling an aggrieved face while looking at a screen

If you’re looking for an example of just how little UK investors can take for granted in 2023, the BT (LSE: BT.A) share price is as good a candidate as any.

Rollercoaster ride

At the beginning of the year, BT stock changed hands for around 115p. Over the next few months the valuation rose, hitting a peak of 165p in April, no doubt helped by investors opting for defensive stocks over high-growth alternatives.

That’s a near-44% return — not the sort of thing you expect from a FTSE 100 telecommunications juggernaut. Then again, I doubt holders will have been complaining.

This is assuming they took this as a sign to take some profit, of course.

The problem is that the BT share price has resumed its terrible form ever since. Indeed, things are so bad that the stock has now dropped back to the level not seen since the dark days of December 2022, where a 52-week low was set.

Can the BT share price recover?

Given that the announcement of a new CEO, Allison Kirkby, couldn’t get investors enthused, I think it’s going to take something special to recapture that positive momentum.

Interestingly, fresh talk of a takeover bid from Deutsche Telekom (which already holds a 12% stake in BT) hasn’t had much effect either. Perhaps investors have simply grown tired of the rumour mill and are wanting their ‘show me the money’ moment.

I wouldn’t be holding my breath.

Without some external event, a revival in the BT share price surely remains dependent on evidence it’s managed to reverse the decline in revenue and pre-tax profit seen in recent years.

Proof that it really is tackling its monster debt pile and pension liabilities would also be nice. But that’s not easy given the enormous and ongoing investment required by the business itself.

Again, I’m not convinced.

Not all bad

For balance, it’s worth highlighting a couple of things in BT’s favour. First, there’s the current valuation. BT looks to be in bargain basement territory, trading as it does at a price-to-earnings (P/E) ratio of just above six. Few companies from the FTSE 100 can be snapped up for less.

Then there’s the dividend stream. Having fallen so far, BT shares now yield 6.5%. Analysts also estimate that the total payout will be covered more than twice by profit.

That said, it’s worth pointing out that cash returns are half what they were in 2019. So that juicy yield is more down to the BT share price falling than anything else.

Value trap

The killer blow to the investment case here however is the long-term performance of the BT share price.

If I’d invested £1,000 five years ago, my position would now be worth roughly half that (excluding dividends). Seen from this perspective, BT screams ‘value trap’ and very little else.

True, past performance is no guarantee of future returns. But that’s not to say the former should be dismissed as entirely irrelevant. To be blunt, if it looks like a donkey and behaves like a donkey, you probably have a donkey.

Fifty-two-week low or not, my inner contrarian simply can’t get excited about owning this stock when so many other companies seem to offer so much more upside.

The post The BT share price has tumbled back to its 52-week low. Time to buy? appeared first on The Motley Fool UK.

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More reading

  • Nearing 5-year lows, here’s what the charts say for BT shares
  • I’ll stop staring at dirt cheap BT shares and buy this world-class income stock instead
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  • Should I sell Rolls-Royce shares and invest my 90% profit in BT Group?
  • Which is better value, the BT or Vodafone share price?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.