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The performance of the BT (LSE: BT-A) share price over the past five years has been far from impressive. Down 55% in this period, 2021 saw the stock reverse its poor form as it offered investors a glimpse of its potential. Up over 28% for the year, we saw a revival as the telecommunications giant stock ended the year trading at 169p. So, could 2021 prove to be a turning point for BT? And could the share price break the 200p barrier if it carries on its form in 2022? Let’s take a look.

BT progress

What I most like about BT is the progress it is making with its operations. After poor performances and stagnation in years gone by, 2021 saw it take great strides for the future. One way it is doing this is through the expansion of its full fibre broadband. Openreach, a division of the group, has now rolled out broadband to over 6m premises – and is on track for its 2026 target of 25m. Other measures include the continuous expansion of its 5G network, and the firm now has over 5m 5G-ready customers. With the potential for the UK to reach 800m 5G devices in 2022, according to the CCS, this shows the opportunity this market has to offer to BT. Should it be able to capitalise on this effectively, I think this could lead to us seeing a rise in the BT share price in 2022.

Recent announcements by the firm’s management will also provide investors with confidence. BT has brought forward its FY25 target of £2bn in annualised savings by a year, while the group also reduced its capital expenditure for FY23 by £200m. As a potential investor, these are the signs I look for.

I also think potential takeover speculation could fuel a rise in the BT share price. Patrick Drahi, who now holds an 18% stake in the business, has made moves to further increase his control in the firm. Although he cannot mount a full takeover bid until June of this year, further talk of a takeover by the renowned telecoms investor could boost the share price.

BT share price risks

One concern I have with BT is the potential impact rising interest rates could have on the cost of the firm’s debt. BT’s debt is substantial – with its latest results indicating it sits at £18.2bn – and higher rates will mean higher costs for BT, potentially stunting its growth. While this may be in part attributed to the expansion I have highlighted above, this is an issue for me.

200p in 2022?

That said, I think 2022 could be a strong year for BT. While the potential rising debt is of concern, the firm is heading in the right direction with the moves it is making. Further speculation of a takeover as we edge closer to June will more than likely result in a rise from the current share price of 174p. The share price broke the 200p threshold in June last year, and prior to a dip at the beginning of 2020, we also saw the stock as high as 204p. As such, if BT can replicate its 2021 form, I think we could see the share price edge above the 200p mark. Because of this, I would look to buy some shares. 

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Darktrace (LSE: DARK) share price has plunged 55% since the end of September. Despite this performance, shares in the cybersecurity company have added 34% since its IPO in April. 

However, while the stock has added value since its IPO, the recent decline is notable. It suggests the market has lost confidence in the business and its ability to hit growth targets. 

The thing is, I think this is a mistake. As such, rather than avoiding the business, I have been looking at the stock to see if it could be worth adding to my portfolio. 

Darktrace share price outlook

When I have covered the cyber security company in the past, I have always tried to highlight its long-term potential. The cybersecurity industry is vast and growing at a double-digit annual rate. As the world becomes more and more digitally-focused and interconnected, I think it is unlikely this trend will end anytime soon. 

Darktrace’s unique offering helps it stand out in what is quite a crowded sector. The company uses artificial intelligence to identify threats and shut them down before they can cause too much damage. 

Its impressive roster of clients suggests the technology is not just a vanity project. It works, and clients are willing to pay for it. 

According to the group’s latest trading update, the number of customers using its services increased nearly 40% during the six months to the end of December. This supported a 50%+ increase in revenue. 

Further, annualised recurring revenue churn, which indicates how many customers are moving away from the service every year, fell from 7.6% in the first half of 2021 to 6.9% for the last six months of the year. 

These figures show clients are not only drawn to the enterprise, but when they arrive, they are staying.  In my opinion, there is no better indicator of a company’s quality than customer retention. 

Company valuation

Placing a value on the Darktrace share price is a little tricky because the company is not yet profitable. It could be some time before it moves into the black, as it is spending heavily on growth initiatives. 

I think this is the right decision. Sooner or later, the group can dial back on growth but, for the time being, it seems fitting that the business should be spending heavily to establish itself. 

If it does not spend enough, customers may start moving elsewhere. In the worst-case scenario, without spending on research and development, its software may not be able to stand up to sophisticated cyber attacks. This could have a terminal impact on the group’s reputation.

The stock is trading at a price-to-sales (P/S) multiple (a better indication of value when businesses are unprofitable) of 14.3. The international peer group average multiple is around 60. 

These numbers suggest the stock is undervalued. As such, and considering the company’s growth prospects, I would be happy to add the shares to my portfolio today.

I think the Darktrace share price has tremendous potential and looks undervalued. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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The rise of the Omicron variant threw the slowly recovering travel industry back into crisis a few weeks back, but could also be good news if it really is the mildest variant yet. Today, I’m wondering whether two FTSE 250 travel stocks that interest me can weather the storm and go on to better things. The two stocks represent the broader travel industry as they operate flights, holiday packages and cruises. Testing infrastructure and closed borders in many countries have prevented people from travelling. But if Omicron is indeed milder, is there a glimmer of hope for this battered industry and these stocks in particular? Let’s take a look.

Wizz Air

Wizz Air (LSE: WIZZ) arguably has the strongest balance sheet of the publicly traded airline stocks. Its half-year report for the six months up to 30 September also contained good news. Wizz Air stated that its passengers carried figure was up 92.7% from the previous year. This is a strong signal that demand for flights was increasing again and that people were generally travelling a lot more. Revenue also grew by almost 87% and losses were narrower.

While Wizz Air was already operating from a relatively strong cash position, those recent results indicate that this stock has rebounded well. It’s also expanding, recently acquiring Norwegian Air’s slots at London’s Gatwick Airport. The Omicron variant led to a 16.5% fall in Wizz Air’s share price in December 2021, however, demonstrating that the Covid pandemic is an ever-present danger to travel stocks. This compares with a 5% increase in share price for the whole of 2021. Citigroup analysts also recently downgraded Wizz Air and expressed a preference for long-haul carriers. Airlines operating on a long-haul basis, Citi said, are already benefiting from the opening of transatlantic routes and uninterrupted cargo operations.  

TUI

Travel firms have faced cash crunches during the pandemic but holidays giant TUI (LSE:TUI) issued convertible bonds in April 2021. This raised €400m to bolster the balance sheet and preceded a €1.1bn capital raise in November 2021. That came after revenue nearly collapsed over the past two years. In 2019, revenue was nearly €19bn. The full-year results up to 30 September 2021 revealed revenue was only €4.7bn.  

Nevertheless, increased European travel resulted in 66% hotel occupancy and 14 out of 16 cruise ships in operation. The underlying loss for the firm’s cruise segment in Q4 2021 was €43m, narrowing significantly from €125m for the same period in 2020. I believe this means TUI is starting to recover. It also reported 4.1m bookings for Winter 2021/22 and Summer 2022, indicating greater consumer confidence in travel. Similar to Wizz Air, TUI’s share price is down 11.2% for the past three months. 

I have reasons to be optimistic about both of these stocks going into 2022. They’ve performed well since markets resumed trading this month. Given the ongoing threat from new Covid variants, however, operations may stall if new measures are introduced by governments and share prices will fall in turn. Nonetheless, I feel that these two stocks should have a much stronger 2022 if the pandemic eases. While I’m not buying any of these shares at the moment, because I want to see more evidence of a short-haul recover yin the near term. I may well add them to my portfolio at a future time.

Andrew Woods has not position in any of the companies mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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Lloyds Bank (LSE: LLOY) shares are having a great run. Recently, they climbed to 53p – its highest level since February 2020. Could the stock hit 60p this year? I think there’s a good chance it could. Here’s why.

Why Lloyds’ share price could hit 60p in 2022

Right now, the business environment for UK banks such as Lloyds appears to be quite favourable. This year, the International Monetary Fund expects the UK economy to grow by 5%.

While that would be a lower rate of growth than in 2021 (6.8%), it’s still a very healthy level, and well above historical long-term averages. This should benefit Lloyds, which is often seen as a proxy for the UK economy.

Meanwhile, the Bank of England (BoE) is now raising interest rates. This is also good news for the banks, as higher rates allow them to generate a larger spread between their lending and borrowing rates, which can lead to higher profits.

Last month, the BoE lifted its key rate from 0.1% to 0.25%. Analysts at FocusEconomics – a leading provider of economic analysis and forecasts – see UK rates ending 2022 at 0.6% and 2023 at 0.92%.

Rock-bottom valuation

The thing is though, while the outlook for Lloyds is very encouraging, the stock’s valuation is still extremely low. For the year ending 31 December 2021, City analysts expect Lloyds to generate earnings per share of 8p. That means at the current share price of 53p, the stock’s price-to-earnings ratio is just 6.6.

I think there’s plenty of room for valuation expansion here. If Lloyds shares were to hit 60p, the P/E ratio would only be 7.5, which is still very low. This is one reason why I think an elevated share price in 2022 is certainly achievable.

However, it’s not just the valuation that stands out here. There’s also the dividend and the potential for share buybacks. In terms of the dividend, analysts currently expect Lloyds to pay out 2.11p per share for 2021.

At the current share price, that equates to a yield of around 4%, which is very attractive in today’s low-interest-rate environment. The healthy payout here could tempt income investors into the stock, pushing its share price higher.

Risks

Of course, there are risks to my 60p investment thesis. One is Covid. Omicron and other new variants could potentially derail the UK economic recovery. If we did see the recovery stall, the BoE would most likely pause its interest rate hikes in a double blow to Lloyds.

Another risk is general stock market volatility. Last year, volatility was very low. This year, many market strategists expect it to be significantly higher. A bout of market turbulence could see Lloyds shares decline.

Overall however, I’m cautiously optimistic that Lloyds’ share price can hit 60p in 2022. That’s why, as a holder of the stock, I’m holding on for now, despite the strong gains it has generated over the last year.

Edward Sheldon owns Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’m always on the hunt for ideas that could increase the amount of passive income I get. After all, there are very few things not to like about making money without having to make a huge effort to get it. One of the main ways that I try and make this type of income is via dividends from companies. Here are a few ways that I’m trying to squeeze more juice out of that lemon for 2022.

Looking out for faltering stocks

The first thing I’m doing is reviewing my portfolio to see if any companies have cut or suspended the dividend payout since I last checked. I have to remember  that once I’ve bought a share, the dividend yield isn’t set in stone. There are two parts that go into the yield calculation. It includes both the share price and the dividend per share. So even though the share price is fixed from when I purchased shares, the dividend per share can change.

Therefore, even though the money I make from dividends counts as passive income, I do still need to pay active attention to the changes in yield. As a result, if I spot that a company has been reducing the dividend per share, I need to consider why. If the outlook going forward isn’t positive and the company is struggling, I might want to consider selling the stock.

We at The Motley Fool believe in long-term investing, but holding on to a permanently underperforming stock isn’t a good idea for me. With the money I raise from selling, I could reinvest the proceeds in a stock with a higher dividend yield (and stronger future prospects). In this way, I’ve increased my passive income overall.

Pulling my yield higher 

The second point I can consider is boosting my overall dividend yield via investing fresh money. Let’s say that I currently make £1,000 a year in passive income, with an average yield of 5%. If I have some spare funds that I’m happy to put to work, I can add in some stocks with yields in excess of 5%. This will help to pull my overall yield higher.

For example, if I manage to increase the yield from 5% to 6%, this extra 1% equates to £200 in passive income annually. It shows that even a small increase can provide me with a good uplift in monetary benefit.

One point to note here is that by reaching out for high-dividend-yield stocks, the risk usually increases as well. So I need to be careful regarding my stock selection for these type of companies.

Passive income from share price gains

The final point to consider is to buy dividend shares that have historically seen the share price make gains. For example, SSE has offered a minimum dividend yield of 5% over the past three years. During this period, the share price has risen by 40%. Given the share price increase, I can make passive income from drawing out some of the profit from this rise while leaving the original amount invested.

Clearly, past performance is no guarantee of future returns. But if I’m confident on the outlook of a stock going forward, then I can use potential share price gains to boost my passive income in the years to come.

Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’m searching for the best dirt-cheap UK shares to make big money in 2022 and beyond. Here are three penny stocks on my research list. Should I buy them?

Dirt-cheap penny stocks

Vertu Motors (LSE: VTU) is a share I sold out of towards the end of last year after a strong share price run. The shares though are still cheap, trading on a P/E of 13.

Continuing shortages of chips leading to fewer new cars and higher second-hand car prices have been very positive for Vertu’s shareholders in recent times. That fortuitous set of circumstances won’t last forever though. But if the new car market remains constrained for much of this year, the company could do well.

What’s not clear right now is how much of the share price gains will fall away as and when market conditions normalise. That’s the biggest risk I see when it comes to investing in Vertu – or indeed any – of the car dealers right now.

I think Vertu is a very good penny stock and is potentially a bargain, but I won’t be re-adding it to my portfolio, simply because of the market uncertainty.

South African miner Sylvania Platinum (LSE: SLP) is a share I hold. It’s also cheap. The shares trade on a P/E of only three. That’s staggeringly low, even compared to many other miners.

That’s a reflection of 2021 being a tough year for the company. Prices of the metals it processes – particularly rhodium – fell substantially in the second half of the year. At the same time costs rose. That’s a double whammy that really hit the shares. As I’ve cautioned before, mining is an inherently difficult and cyclical business. And operating in South Africa, which has seen civil unrest, won’t have helped the share price either. 

Overall though, the shares are dirt-cheap and I’ll be keeping them in my portfolio for the foreseeable future. If the price of rhodium, in particular, rises this year the shares could recover strongly.

Building back better

Another cheap penny stock I’ve come across is Speedy Hire (LSE: SDY). Its price-to-book ratio is 1.47, which is incredibly low. As an aside, it was a key metric for Warren Buffett’s mentor, Benjamin Graham, and is important for many value investors. 

The tools and equipment rental specialist recorded a 29.9% year-on-year improvement in EBITDA for the six months ended 30 September, to £49.1m, while its adjusted operating profit was £9.9m higher at £16.2m.

The company said artificial intelligence has meant it’s been better able to utilise its assets, which in an asset-heavy business is important. The more it rents out, the better it’s going to do financially and in turn for shareholders.

The concern with such a business is the need for continuous investment in equipment. Many investors prefer asset-light businesses that can scale more easily. Speedy Hire is also very exposed to the construction market. Any slowdown in building in the UK, in particular, would hurt the company and the share price. I’ll keep an eye on Speedy Hire but have no plans to add the penny stock as a new investment.

Vertu Motors, Sylvania Platinum and Speedy Hire all look cheap on slightly different metrics. The standout one that appears very undervalued to me though is Sylvania Platinum. That’s why I hold the shares and will likely add more. 

Andy Ross owns shares in Sylvania Platinum. The Motley Fool UK has recommended Vertu Motors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.