Exane BNP Paribas Upgrades Telia Co AB Stock to Outperform with Price Target of SEK40.00
In a recent development, Exane BNP Paribas has raised its rating on Telia Co AB stock to Outperform from Neutral, with a price target increase to SEK40.00 from SEK28.00. The analysts at the firm highlighted positive shifts in Telia's commercial perception and potential operational improvements as key drivers for the upgrade.
The upgrade comes after the STAMP 2024 survey revealed a significant improvement in Telia's commercial perception, particularly in Net Promoter Score (NPS) for mobile and broadband services. This positive development is expected to enhance Telia's commercial traction in Europe's rapidly growing telecommunications market.
Furthermore, Telia's recent initiatives to reduce headcount and vendor financing costs are being undervalued by the market. These efforts are projected to lead to substantial reductions in operating expenses, estimated at SEK2.6 billion, along with interest savings.
The analysts anticipate that these changes will contribute to a higher forecasted compound annual growth rate (CAGR) for EBITDA between 2024 and 2027, compared to the consensus estimate.
Moreover, Telia's dividend, which has remained uncovered for several years, is expected to be fully covered by operational free cash flow (FCF) in 2025 and "all-in FCF" in 2026. This sets the stage for potential mid-term growth in dividend per share (DPS).
Additionally, the potential monetization of Telia's infrastructure assets, considered undervalued within the company, could offer further upside potential. Market consolidation in Sweden, which may occur if Brussels alters its regulatory stance, could also positively impact market sentiment towards Telia.
In conclusion, the upgrade of Telia Co AB stock by Exane BNP Paribas reflects a positive outlook for the company based on improved commercial perception, operational efficiencies, and potential for dividend growth. Investors should consider these factors when evaluating their investment decisions in the telecommunications sector.