Deutsche Bank has resumed coverage on Swisscom AG (SCMN: SW) (OTC: OTC:), issuing a Hold rating and setting a price target of CHF570.00. The bank had previously given a Sell rating on the company, but the recent acquisition of Vodafone Italia has changed the outlook significantly.
Key Points:
- Swisscom's acquisition of Vodafone Italia is expected to boost its free cash flow by over 30%.
- Deutsche Bank now forecasts a more than 40% increase in Swisscom's FCF by fiscal year 2028.
- Swisscom reported positive Q2 2024 results, with revenue up by 1.8% driven by growth in Italy.
Analysis:
Swisscom's acquisition of Vodafone Italia has been a game-changer, with Deutsche Bank now projecting significant growth in the company's free cash flow over the next few years. This is great news for investors, especially those interested in dividends, as Swisscom has a track record of maintaining dividend payments for 26 consecutive years.
With a P/E ratio of 16.86, Swisscom may seem relatively high compared to its earnings growth, but the company's stability, low price volatility, and strong cash flows make it a solid investment. Additionally, the recent sale of its FiberCop stake and the expansion in the Italian market demonstrate Swisscom's strategic focus on growth and innovation.
InvestingPro Data highlights Swisscom's financial health, with a market capitalization of $33.71 billion and a gross profit margin of 55.13%. For dividend-seeking investors, the company offers a current yield of 2.38%, despite a slight dip in dividend growth.
Overall, Swisscom's outlook looks positive, with the Vodafone Italia acquisition expected to drive significant growth in free cash flow. Investors looking for a stable investment with growth potential and consistent dividends should consider Swisscom AG as a strong contender in their portfolio.