BT share price: 4 things to watch out for ahead of its Q2 results

Challenging market conditions pushed BT Group’s shares to hit a four-year low in August, though the stock has gained more than 25% since then with investors encouraged by the telecom’s turnaround strategy.

However, analysts remain sceptical about the company’s performance and, unlike BT’s management, don’t believe its share price will make significant gains over the short-term due to ‘significant uncertainties’ facing the telecoms provider.

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Analysts uncertainty about BT shares

Despite BT doing its best to remain upbeat about its growth prospects, analysts remain sceptical about its prospects over the near-term, with concerns raised over its ability to fund its fibre broadband rollout to 15 million homes across the UK by 2025.

‘BT acknowledged significant uncertainties remain and until there is visibility, we think it will be difficult for the share price to re-rate in the near-term,’ UBS analysts said in a note to investors.

Brexit uncertainty continues to weigh heavily on BT’s share price, as does the threat of a British ban of Chinese telecoms equipment manufacturer Huawei, a major supplier to BT.

Analysts at Berenberg echoed similar sentiments to their counterparts at UBS, telling investors that ‘while BT looks increasingly cheap on valuation, it is hard to see the share performing until the uncertainties are to some extent addressed’.

Uphill battle for BT

BT faces a myriad of challenges, some created by the market and others by itself, with the company's balance sheet laden with debt at a time when competition among British telecom providers is high.

However, earlier this month, BT published its turnaround strategy which aims to ‘boost’ its UK business. The news was well-received by investors, sending its stock more than 25% higher to 200p, after hitting a four-year low of 158p in August.

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Openreach remains a priority for BT

Openreach, BT’s broadband and telephone network unit, remains a priority for the group.

However, its margins are being squeezed by industry regulator, Ofcom, consumers stand to benefit from the watchdog’s close eye on broadband providers, with it helping to improve accessibility to high-speed internet connections at lower prices.

But a better deal for consumers comes at the expense of limiting returns for investors.

BT hopes to remain on track to hit full-year guidance

BT remains on track to hit its full-year guidance, with the company looking to deliver adjusted EBITDA of between £7.9 billion - £8 billion, along with free cash flow of between £1.9 billion - £2 billion.

However, the company remains under significant pressure from multiple angles and its turnaround strategy will need to provide tangible results if its stock is to continue to rise.