BT share price: Barclays says enterprise division faces top-line pressures

Barclays argues that BT Group’s (LON:BT.A) newly formed enterprise division is facing top-line pressures which are unlikely to abate any time soon, Proactive Investors reports. The comments come as the former telecoms monopoly prepares to update investors on its third-quarter performance on January 31.

BT’s share price has been little changed in today’s trading, having inched 0.13 percent lower to 237.70p as of 14:48 GMT. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.94 percent lower at 6,905.18 points.

Barclays weighs in on BT

Barclays reaffirmed BT as an ‘equal weight’ today, with a price target of 250p on the shares. The move comes ahead of the telco’s Q3 results next week which will, for the first time, include numbers from the group’s merged units after the company combined its business and public sector divisions with the wholesale and ventures arm to create BT Enterprise.

“A deep dive on BT’s newly formed enterprise division (30 percent of enterprise value, 40 percent of free cash flow) shows how the division has been a successful and high-return on capital employed cash cow for BT for years,” Barclays said, as quoted by Proactive Investors. “It does however also show clear top-line pressures, which are unlikely to abate any time soon due to structurally declining revenue trends that are exceeding newer growth areas, driven in part by technology disruption.”

The broker, however, reckons that “continued cost-cutting should support the division going forward – a theme likely to persist at the upcoming 3Q results, where expectations appear low”.

Other analysts on telco

Berenberg Bank, which rates BT as a ‘buy,’ meanwhile boosted its price target on the shares from 270p to 275p today. According to MarketBeat, the former telecoms monopoly currently has a consensus ‘hold’ rating and an average price target of 272.33p.

As of 15:12 GMT, Tuesday, 22 January, BT Group plc share price is 237.70p.