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On Thursday, Citi analysts adjusted their stance on Freenet (ETR:FNTGn) AG (FNTN:GR) (OTC:FRTAF), downgrading the stock from Buy to Neutral. The new price target set by the firm is EUR29.50, up from the previous EUR28.40.
The downgrade comes after Freenet’s shares experienced a significant decline of 16% following the company’s first-quarter results. The results revealed disappointing developments in key performance indicators (KPIs) for both the mobile and TV segments, especially after a strong performance in 2024. Citi analysts pointed out that Freenet’s strategic decision to avoid competing in the low-priced SIM-only markets, coupled with challenging comparisons in TV, is likely to result in continued softness in KPIs in the upcoming quarters.
Citi also highlighted concerns about increased marketing expenditures and the potential negative impact from Media Broadcast on Freenet’s earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fiscal year 2025. These factors are expected to push EBITDA towards the lower end of the company’s guided range.
Despite these challenges, Citi acknowledges that Freenet’s valuation remains attractive, and the anticipated share buybacks could have a positive impact. Nonetheless, the combination of soft KPIs and a lack of momentum in consensus estimates in the short term could hinder the stock’s continued performance, leading to the decision to downgrade the rating.
The price target increase to EUR29.50 reflects Citi’s expectation of the positive effects that share buybacks may have on the company’s financials. The new target suggests a slight optimism about the company’s ability to deliver value despite the current operational headwinds.
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