On Tuesday, Berenberg upgraded shares of Cellnex Telecom (CLNX:SM) (OTC: CLNXF) from Hold to Buy, raising the price target to EUR42.00 from EUR36.00. The banking firm believes that European towers are poised for a resurgence as an investment class. This optimism stems from a decoupling of long-dated bond yields for companies like Cellnex and INWIT from the Federal Reserve's influence, a trend observed recently.
The upgrade is grounded on expectations that the European Central Bank (ECB) will decrease the deposit rate by 200 basis points starting in June. Berenberg anticipates that this could potentially increase Cellnex's share price by approximately 5% for every 25 basis point reduction in long-term bond yields. The bank's analysis suggests a favorable outlook for the sector, which had previously been under pressure akin to opposing the Federal Reserve's policies.
Berenberg also notes that the anticipated lower refinancing rates may encourage management teams to utilize additional leverage more aggressively. This strategic financial management could provide companies like Cellnex with more room to maneuver and capitalize on the changing economic landscape.
The firm's positive stance on Cellnex reflects a broader expectation of a positive turn for European tower companies. The upgrade and new price target represent a significant shift in Berenberg's outlook for the stock, signaling confidence in the company's prospects amid changing monetary policy in Europe.
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