Sign up Australia
Proactive Investors - Run By Investors For Investors

TalkTalk slumps after Barclays downgrades to 'equal weight' on valuation grounds

TalkTalk's revenues are expected to improve in the second quarter after the telecoms provider hiked prices for its customers in August
TalkTalk
Barclays sees an opportunity for TalkTalk to co-invest with Openreach on its fibre roll-out plans

Talktalk Telecom Group PLC (LON:TALK) shares dropped after Barclays downgraded its rating on the stock to ‘equal weight’ from ‘overweight’ on valuation grounds and lifted the target price to 215p and 185p.

Barclays expects the company’s first half interims on 15 November to show improving revenues with churn remaining low at about 1.3% and a pick-up in average revenue per user.

READ: TalkTalk slides as revenues drop, but full year guidance is unchanged

However, the bank sees no “significant change in earnings trajectory” as the company focuses on growing the customer base and repositioning its mobile strategy.

In July, TalkTalk reported a 3.2% decline in first quarter revenue as growth in corporate and wholesale broadband was offset by a slowdown in its consumer division. During the period it added 20,000 broadband customers on its network in the first quarter while churn fell to 1.2%, supported by the take-up of fixed-low price plans.

Barclays estimates the revenue decline will ease to 1% in the second quarter, supported by its move to raise prices for broadband and mobile customers from 1 August.

The bank added that it sees an opportunity for TalkTalk to co-invest with Openreach on its roll-out of ultrafast fibre-optic broadband.  

Openreach is currently consulting with stakeholders to help invest in building large-scale new infrastructure to replace ageing copper telephone lines.

READ: TalkTalk replaces CFO Iain Torrens with Dixons Carphone executive in reshaping of top team

“We believe the economics of co-investment could also be very attractive (see body of note), boosting medium term value,” said Barclays. “The balance sheet does provide a constraint, however.”

Shares in TalkTalk fell 6.38% to 204.09p in afternoon trading. 





Register here to be notified of future TALK Company articles
View full TALK profile View Profile

Talktalk Telecom Group Timeline

Related Articles

1504096349_shutterstock_420468130.jpg
August 30 2017
It also confirmed it expects growth for the full-year to be in line with market expectations

No investment advice

The information on this Site is of a general nature only. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You acknowledge and understand that neither the Company, its related bodies corporate, the information providers or their affiliates will advise you personally about the nature, potential value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You should read our FSG and any other relevant disclosure documents and if necessary seek persona advice prior to making any investment decision.

You understand and agree that no Content (as defined below) published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person.

You understand that in certain circumstances the Company, its related bodies corporate, the information providers or their affiliates may have received, or be entitled to receive, financial or other consideration in connection with promoting, and providing information about, certain entities on the Site and in communications otherwise provided to you.

You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Before you act on any general advice we provide, please consider whether it is appropriate for your personal circumstances.

© Proactive Investors 2017

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use