On Tuesday, Exane BNP Paribas (OTC:BNPQY) raised its rating on Telia Co AB (ST:TELIA:SS) (OTC: TLSNF) stock to Outperform from Neutral and increased the price target to SEK40.00 from SEK28.00. The firm's analysts cited a positive shift in Telia's commercial perception and potential operational improvements as key factors for the upgrade.
The upgrade follows findings from the STAMP 2024 survey, which indicated a broad-based improvement in Telia's commercial perception, with notable gains in Net Promoter Score (NPS) for mobile and broadband services.
The analysts believe these improvements could lead to better commercial traction in Europe's second-fastest-growing telecommunications market.
Additionally, the market underappreciates Telia's recent initiatives to reduce headcount and vendor financing costs. These efforts are expected to reduce operating expenses significantly, approximated at SEK2.6 billion, and interest savings.
The analysts project these changes to contribute to a higher forecasted compound annual growth rate (CAGR) for EBITDA between 2024 and 2027, estimated at 4.4% compared to a consensus of 2.6%.
The analysts also noted that Telia's dividend, which has been uncovered for many years, is expected to be fully covered by operational free cash flow (FCF) in 2025 and "all-in FCF" in 2026. This positions the company for potential mid-term growth in dividend per share (DPS).
Lastly, the potential for monetization of Telia's infrastructure assets, which are believed to be undervalued within the company, could provide further upside.
Additionally, the possibility of market consolidation in Sweden, which is seen as likely if Brussels shifts its regulatory stance, could positively influence market sentiment toward Telia despite some reservations about the long-term benefits of such consolidation.
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