BT share price dips as Citigroup warns of higher capital expenditure

on Oct 9, 2017
Updated: Mar 11, 2020

Shares in BT Group (LON:BT.A) have lost ground in today’s session as analysts at Citigroup lowered their rating on the former telecoms monopoly, pointing to an increase in capital expenditure and the loss of wholesale customers. The comments mark another blow for the blue-chip group after Morgan Stanley recently pointed to around a 30-percent downside risk to the telco’s dividend.

As of 14:09 BST, BT’s share price had lost 0.88 percent to 280.66p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.26 percent lower at 7,503.58 points. The group’s shares have lost more than 23 percent of their value over the past year, as compared with about a 6.5-percent rise in the Footsie.

Citigroup lowered its rating on BT from ‘buy’ to ‘neutral’ today, and trimmed its price target on the stock from 360p to 310p. The move came after the telco recently signalled plans to spend up to £600 million connecting a million homes in rural areas with faster broadband, as reported by The Times.

“Our estimate changes leave BT looking reasonably valued compared to peers, indeed somewhat expensive on FCF (free cash flow) yield,” Citigroup pointed out, as quoted by Proactive Investors. “The main changes are the increase in capital expenditure and the loss of around 1.5m wholesale customers longer-term.”

The comments come as BT remains under regulatory pressure to improve performance at its network division Openreach.

The 22 analysts offering 12-month price targets for BT for the Financial Times have a median target of 345.00p on the shares, with a high estimate of 450.00p and a low estimate of 240.00p. As of October 6, the consensus forecast amongst 24 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.

As of 14:53 BST, Monday, 09 October, BT Group plc share price is 280.05p.