We think BCE is in a situation that could be considered a classic value trap where it always looks cheap compared to historical valuations while paying a generous dividend yield. The investment thesis basically changed for the worse since the company announced the Ziply acquisition, which was more expensive than BCE’s stock was trading at the time. As a consequence, its capex and debt expanded substantially in efforts to grow again. Of course, the company can still turn itself around if it manages to pay down debt, reduce capital intensity, and improve organic growth, but it is highly uncertain if the company can manage to do that, and it may take years for the turnaround situation to play out.
Contrarians could work well for investors in times of overall market declines, but not when the market keeps reaching new highs while BCE just keeps being under pressure. We think investors are better off looking for opportunities elsewhere.