Shares of BCE (TSX:BCE) are continuing to trade on a bearish note for a second consecutive year in 2023. After losing 9.6% of its value last year, BCE stock has seen about 15% value erosion this year so far to currently trade at $50.68 per share. In comparison, the TSX Composite benchmark has seen a 1.4% decline in 2023 so far after sliding by nearly 9% last year.
Nonetheless, we shouldn’t forget that temporary market corrections can give investors opportunities to buy some fundamentally strong stocks at a big bargain. So, does BCE stock’s recent declines make it look cheap to buy for the next 10 years? Before looking at some fundamental factors that could play an important role in determining BCE’s share price movement in the future, let’s take a quick look at the main reasons for its dismal stock performance in recent years.
Why BCE stock has fallen in recent years
Interestingly, BCE stock yielded positive returns in nine out of the 10 years between 2010 and 2019 before the global pandemic started affecting businesses globally in 2020. After pandemic-related restrictions led to a big selloff in the Canadian stock market, BCE stock slipped by 9.5% in 2020.
Even as new coronavirus variants kept affecting businesses globally in 2021, consistent demand for BCE’s services helped it post a strong financial recovery in the latter half of the year. As its financial growth trends improved, BCE’s share prices staged a spectacular rally, delivering about 21% positive returns that year.
These gains, however, didn’t last for very long as BCE stock turned negative again in 2022 after inflationary pressures forced central banks in Canada and the United States to rapidly raise interest rates, triggering another market selloff.
While the latest round of interest rate hikes seems to be nearing its end, macroeconomic uncertainties are far from over, as persistent inflationary pressures are raising the possibility of a near-term recession. That explains why BCE stock is continuing to trade on a bearish note in 2023.
Where will BCE stock be in 10 years?
Despite facing economic challenges in recent years, BCE’s total revenue has risen 6% in the five years between 2017 and 2022. Similarly, its adjusted net profit during the same five years has grown positively by nearly 1%. Its diversified business model has allowed BCE to continue raising dividends, even in tough times, which is in line with its dividend-growth model. To give you an idea, the Canadian telecom giant has been increasing its dividends for 15 consecutive years, irrespective of temporary economic and market cycles.
On the one hand, BCE’s robust balance sheet gives it a strong financial base to navigate the ongoing period of economic uncertainty without big troubles. On the other hand, its continued focus on investing in new technologies, like pure fibre and 5G networks, positions it favourably for future growth, which should help it tap into new market opportunities and accelerate financial growth.
While it’s nearly impossible for anyone to predict where exactly BCE stock will be after 10 years, after recent declines, I find it undervalued based on its strong long-term fundamentals. That’s why I wouldn’t be surprised if BCE stock outperforms the broader market by a wide margin in the next 10 years. Besides that, its impressive 7.6% annualized dividend yield makes it look even more attractive for income investors.