I’m going to cut right to the chase. When it comes to BCE (TSX:BCE), investing last year hasn’t been great for investors. In fact, shares have sunk lower and lower. BCE stock is now down 18% in the last year alone. So if you were to have put $10,000 into BCE stock a year ago, that would be worth just $7,538 as of writing.
The question is, what about the next year. For that, let’s look at how the company has been performing, and whether it looks as though BCE stock could bounce back.
Earnings
First off, let’s look at BCE stock in terms of its earnings both for the fourth quarter and the year. BCE was able to meet all their financial targets for 2023, seeing strong mobile and internet subscriber growth, according to the company. Net earnings, however, decreased due to one-time costs.
The company also had to perform its largest workforce cut in 30 years, reducing it by 9% or 4,800 employees. It also slowed its fibre network expansion owing to government policies and regulations. This will mean investing $1 billion less over the next two years.
Furthermore, BCE is partnering with Best Buy to operate some stores and cut others, and focusing on The Source. It is also selling 45 radio stations and expanding its Crave streaming service.
Analysts weigh in
As you can see, this was a lot of cutting for BCE. So no wonder investors were concerned. Analysts, however, had a more balanced view. The major restructuring plan to improve profitability and leverage recent investments in technology created mixed responses.
Some saw the restructuring as positive, with improved profitability leading to a company that is more efficient. What’s more, most believe the high dividend is still safe even with the cuts.
However, a high dividend payout limits the future investments of BCE. So it might not be able to differentiate itself from its competitors. The payout ratio is expected to continue being high for several years as the company puts the restructuring plan into place.
Should you buy?
This is a pretty volatile time to be investing in BCE stock, with shares potentially only getting worse instead of better in the short term. However, the telco invested heavily in upgrading its internet network with fibre, and that’s helped gain more broadband subscribers than competitors. Yet it’s now set to slow, and that could give others time to catch up. Even so, they still have the advantage of more customers.
Bell continues to provide a strong wireless service, along with a top-rated media business through Crave, HBO Max, CTV and TSN. So more focus here could provide more profitability.
Yet the regulations limiting expansion cannot be overlooked, with increased competition from peers expanding. This could even lead to price cuts to keep up with the competition.
Overall, BCE is a good competitor in the Canadian telecom market. However, investors may want to wait as they face off with these challenges and meet them on the other side.
