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On Monday, Citi analysts updated their outlook on Deutsche Telekom (DTE:GR) (OTC: OTC:DTEGY), a $153.6 billion telecommunications giant currently trading near its 52-week high, raising the price target from EUR33.00 to EUR34.00 while reaffirming a Buy rating on the stock. The revision follows a detailed review of the company's financial model in anticipation of the fourth-quarter 2024 results, scheduled for February 26. According to InvestingPro data, the company's strong financial health and robust 20% free cash flow yield support this positive outlook.
Georgios Ierodiaconou of Citi indicated that the new price target is a result of several adjustments made to their financial model. These include "housekeeping changes" and the incorporation of the latest estimates for T-Mobile US (NASDAQ:TMUS) provided by Citi's US analyst, Michael Rollins (NYSE:ROL), as well as recent currency exchange forecasts. The analysts expect Deutsche Telekom's revenue and EBITDAaL estimates for the fiscal year 2024 to increase by approximately 1%, building on the company's current annual revenue of $130.1 billion.
The medium-term forecasts for the telecom giant are even more optimistic, with revenue and EBITDAaL estimates rising by 2-6%. This uptick is primarily attributed to stronger performance numbers from T-Mobile US and the impact of a robust US dollar compared to the euro in recent months.
Although the adjusted earnings per share (EPS) estimates for fiscal year 2024 show an approximate 3% increase to €1.83, the medium-term EPS projections remain largely unchanged. The report suggests that this is due to higher depreciation and amortization, as well as increased interest forecasts, which are expected to balance out the improved EBITDAaL figures.
Citi's maintained Buy rating and increased price target reflect a positive outlook on Deutsche Telekom's stock, underpinned by the company's strong fundamentals and the expected financial performance in the coming years. InvestingPro analysis suggests the stock is currently undervalued, with additional metrics and insights available in the comprehensive Pro Research Report. The company maintains a healthy 2.56% dividend yield and has shown consistent dividend growth, making it an attractive option for value investors.
In other recent news, Deutsche Telekom reported a 4% increase in service revenue, a 7% rise in core EBITDA, and a 28% growth in free cash flow year-to-date, according to its Q3 2024 earnings call. Bernstein SocGen Group increased Deutsche Telekom's price target from EUR32.00 to EUR38.00, maintaining an outperform rating, highlighting the firm's confidence in the company's growth prospects, particularly in the U.S. UBS analyst Polo Tang shifted Deutsche Telekom's rating from Neutral to Buy, enhancing the price target to €33.00, up from the previous €31.00.
These recent developments reflect the company's strong financial performance and favorable outlook. Deutsche Telekom's growth trajectory in the U.S. is expected to remain solid, bolstered by its 5G leadership and strong pricing power. Tang believes the downturn in Deutsche Telekom's stock offers investors an opportune moment to invest in a company with significant exposure to the U.S. market.
Deutsche Telekom upgraded its full-year guidance to €43 billion, signaling confidence in its financial trajectory. The company also reported a decrease in net debt by €8.4 billion, leading to a leverage ratio of 2.18. A €2 billion share buyback program is planned for 2025, reflecting strong financial performance and strategic planning.
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