BT Group PLC (LSE:BT.A) recent rally is seen as stretched by analysts at UBS, who argue that the telecoms group’s in-line fourth quarter leaves little room for fresh upside after a 26% year-to-date share price gain.
The Swiss bank, in a note, repeated a 'sell' rating and 175p price target, compared with a 231p closing price on 20 May. That implies forecast price downside of roughly 24%, or a total expected stock return of minus 20.7% once dividend yield is included.
“Q4 - in line, but high expectations,” UBS said, adding that while the update contained several positives, “the good news is priced in, and that investors may have been hoping for more”.
BT’s fourth-quarter group revenue fell 3.7% to £4.86 billion, slightly below consensus, while EBITDA rose 2.6% to £2.03 billion, broadly in line with expectations. Full-year normalised free cash flow came in at £1.51 billion, ahead of consensus.
UBS noted signs of progress, including easing Openreach line losses, Consumer service revenue turning positive, a new cost savings programme and lower capex, which should support a step-up in free cash flow.
Even so, the broker said revenue pressure remains the central issue. It expects Openreach line losses to stay elevated over the medium term, while Consumer may face pressure from fixed voice revenues and the unwinding of a one-off accounting benefit if prices continue to decline.
BT has raised its cost savings target to £3.7 billion from £3 billion, but UBS noted that free cash flow guidance was left unchanged at £2 billion for FY27 and £3 billion longer term.