Robinhood shares gain on Q2 beat, as user and crypto growth accelerate
On Friday, BofA Securities adjusted its stance on TELUS (NYSE:TU) Corporation (T:CN) (NYSE: TU), downgrading the company’s stock rating from Buy to Neutral and reducing the price target from C$24.00 to C$22.00. The revision follows the telecommunications firm’s fourth-quarter financial results. According to InvestingPro data, TELUS has maintained dividend payments for 27 consecutive years and currently offers a substantial 7.61% dividend yield, making it a significant player in the telecommunications sector.
BofA Securities cited several reasons for the downgrade, including concerns about TELUS’s leverage, which the firm considers unsustainable. These concerns are supported by InvestingPro metrics showing a debt-to-equity ratio of 1.91x and a current ratio of 0.68, indicating that short-term obligations exceed liquid assets. Additionally, BofA noted that TELUS’s dividend payouts exceed its free cash flow (FCF), presenting a potential risk for the company’s financial health. Another point of caution highlighted by BofA was the reported FCF, which includes contributions from a consolidated subsidiary that cannot be utilized to meet dividend obligations.
As a result of these findings, BofA Securities has lowered its adjusted EBITDA estimate for TELUS by 1.3% and trimmed its forecast for dividend growth to 4% from the previous 7%. The analysts believe that given the challenges TELUS faces and its current premium valuation, the stock is now fairly valued at the market price.
Despite the downgrade, BofA Securities acknowledges TELUS’s consistent operational performance and the various strategies the company could deploy to achieve its financial targets over the medium to long term. The new price target of C$22.00 is based on an 8.4x enterprise value to EBITDA (EV/EBITDA) multiple, which reflects the elevated risks associated with the company’s balance sheet and dividend coverage, as well as TELUS’s solid track record of execution. Based on InvestingPro’s comprehensive analysis and Fair Value calculations, TELUS appears slightly undervalued at current levels. Subscribers can access the full Pro Research Report, which includes detailed analysis of TELUS’s financial health, valuation metrics, and growth prospects, along with 8 additional exclusive ProTips.
In other recent news, TELUS Corp (TSX:T) reported impressive financial results for the fourth quarter of 2024, surpassing analyst expectations. The company’s earnings per share (EPS) reached $0.25, higher than the projected $0.23, while revenue came in at $5.38 billion, exceeding the anticipated $5.24 billion. This performance was accompanied by a record gross profit margin of 18.5%. TELUS Corp also completed a major organizational restructuring and maintained its top ranking in the food product industry. Analysts from various firms have noted the company’s strong operational execution and strategic focus on high-margin segments. The company projects a sales growth of 3-4% for 2025, with an organic growth rate of 6-7%, despite potential challenges from foreign exchange fluctuations. TELUS remains focused on brand marketing and operational efficiency as key priorities.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.