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Barclays Capitals cuts targets, estimates for BT Group and TalkTalk in European sector review

The bank’s analysts reduced their target price for BT to 350p from 420p, albeit with the shares currently changing hands at 263.95p each, up 0.5% or 1.2p on last night’s close

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The Barclays analysts also cut their target price for TalkTalk to 170p from 200p with its shares trading at 152.6p

Barclays Capital issued a positive note on the European telecoms sector today, seeing positive growth in underlying earnings and revenue across the vast majority of its coverage universe, but it cut targets and estimates for both BT Group plc (LON:BT.A) and Talktalk Telecom Group PLC (LON:TALK).

For FTSE 100 listed BT, the bank’s analysts reduced their target price to 350p from 420p, albeit with the shares currently changing hands at 263.95p each, up 0.5% or 1.2p on last night’s close.

READ: BT Group "extremely disappointed" as judge orders it to pay €1.8mln damages to ex-Italy boss

They said the target cut reflects around a 1.0% to 1.3% reduction in full year 2019 and 2020 underlying earnings (EBITDA) forecasts for BT, principally in global services and wholesale, which reduces free cashflow by 2% to 4%.

The Barclays analysts also cut their target for TalkTalk to 170p from 200p, with its FTSE 250 listed shares trading at 152.6p this morning, up 2.8% or 4.1p on Thursday’s close.

They said near-term estimates for TalkTalk are unchanged, but they have cut their mid-term EBITDA forecasts by 3%-5$ to reflect greater costs associated with its broadband business.

Overall, Barclays’ analysts noted that European telecom stocks have underperformed in 2017 due to rising capex expectations, dashed hopes of deregulation and slightly lower revenue growth than hoped.

READ: Morgan Stanley thinks BT shares look “cheap on a sum-of-the-parts valuation” but “cautious about stepping in too early"

However, the analysts said, looking into 2018, they see positive revenue and EBITDA growth and believe the sector offers a combination of defensiveness, free cashflow growth and attractive valuations.

Quick facts: BT Group PLC

Price: 109.35 GBX

LSE:BT.A
Market: LSE
Market Cap: £10.84 billion
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