National Bank downgrades BCE and adjusts the telecom stock price targets
National Bank telecom analyst Adam Shine is making a number of changes to his price targets and has downgraded his recommendation on Canada’s biggest telco company.
Shine has decreased his rating on BCE Inc.BCE.TO BCE) to sector perform, from outperform, in a note to clients on Wednesday, and lowered his 12-month price target by three dollars to $63.00 per share.
He pointed out that Bell has seen some tailwinds in the wireless segment and has increased market share for home wireline services due to its ongoing fibre network upgrade.
Shine projects that BCE’s adjusted profit and revenue this year will be slightly lower than 2022. But, the company’s dividend growth is expected to continue.
If Shaw Communications and Freedom Mobile are renegotiated, the wireless competition will intensify.
“We expect the eventual closing of the Shaw and Freedom deals, subject to the Competition Bureau’s appeal(s) and ISED approval, to add to competitive intensity in Ontario, Alberta, and British Columbia,” he said.
Rogers Communications Inc. was the biggest concession.RCI.B.TO RCI) has offered to get its proposed takeover of Shaw to the finish line is to sell Freedom Mobile to Quebecor. Rogers-Shaw is still in force challenges by regulators.
Despite the uncertainty around the deal, he said he’s factoring in Shaw to his financial forecasts for Rogers as of early 2023.
Shine kept Rogers’ rating at outperform, and raised his 12-month price target from $75.00 to $78.00 per share.
Similar to BCE Telus Corp.T.TO TUHe stated that there could be increased wireless competition from Freedom Mobile sales and Shaw.
Shine kept his outperform stock rating and lowered his 12-month price goal for Telus shares to $31.00 from $34.00.
He highlighted the company’s achievements and future tailwinds.
“Telus has enjoyed a premium valuation given its verticalization strategy in Wireline as a point of differentiation and given relatively less competition faced out West,” he said.
“After the successful IPO of Telus International whose valuation has since materially reset, we await future monetization opportunities related to Health and Agriculture.”
The company will see an increase in its free cash flow after it has completed its fibre network buildouts and any pending cost savings. LifeWorks acquisition.
A second risk to the telecom industry is the appointment of Vicky Eatrides as the new chair Canadian Radio-television and Telecommunications Commission
“Look for the new CRTC chair to pursue a more pro-consumer tack than the pro-industry skew of her predecessor,” Shine said.
Michelle Zadikian works as a senior reporter for Yahoo Finance Canada. Follow her Twitter @m_zadikian.
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