BT share price is down 16% from YTD high: is it safe to buy the dip?

The BT share price has pulled back in the past few months, undoing some of the gains it made earlier this year. It was trading at 182.40p, down by 16% from its highest point in August this year. This price is still much higher than the year-to-date low of 133p.

BT Group is facing major headwinds

The BT Group stock price has retreated in the past few months as the company has continued facing major headwinds. One of these challenges is in the broadband industry, which analysts expect to keep slowing in the coming years. 

In a recent note, a New Street Research report noted that the number of customers paying for fixed-line broadband would drop by 250,000 this year. This forecast was notable for BT since it is the most dominant player in the sector. 

One reason for the weakness is that customers are slowly moving to other channels. They are receiving high-speed internet connection through mobile providers and satellite companies like Elon Musk’s Starlink. Competition in the industry, especially from alt nets, has continued growing this year.

Results pointed to broader weakness

The most recent results showed that BT Group lost a significant number of customers in the last quarter. It shed 242,000 broadband customers, much higher than the 205,000 it lost in the same period last year. 

The results showed that the company’s business remained under pressure. Its revenue dropped by 3% to £9.8 billion, while its profitability metrics were much worse. 

BT Group’s profit before tax dropped by 11% to £862 million, while the after-tax tax fell by 14% to £651 million. The earnings per share dropped by 14% to 6.54p. 

A closer look at its segments shows that they all retreated in the last quarter. The consumer division’s revenue dropped by 3% to £4.8 billion, while business and international revenue dropped by 2% and 9%. Revenue of its OpenReach business was flat. 

On the positive side, the company is expected to slow its capital expenditure now that its OpenReach solution has moved to nearly all countries. This slowdown means that the company will boost its free cash flow to about £3 billion by 2030.

Therefore, there is a likelihood that the stock will rebound as investors predict that its dividends will keep growing even as it business slows. This is important as the company has a dividend yield of 4.4%, higher than other companies.

BT share price technical analysis 

The daily timeframe chart shows that the BT stock price rebounded from the 2024 low of 97.7p to a high of 218p this year. It has now pulled back to the current 182.40 as concerns about its growth trajectory has remained. 

BT share price bottomed at 174.10 and then crawled back to the current 18.40. It is now attempting to move above the 50-day and 100-day Exponential Moving Averages (EMA). A move above that level will point to more gains, potentially to the psychological point at 200p. 

However, a drop below the key support at 174.10p will invalidate the bullish outlook. Such a move will point to more downside, potentially to the key support at 150p.