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On Friday, Deutsche Bank (ETR:DBKGn) analysts initiated coverage on Zegona Communications (ZEG:LN) with a Buy rating. The analysts set a price target of £10.30 for the stock, highlighting potential upside and operational momentum.
The analysts noted that there is a 70% upside potential for Zegona Communications, even if the company only achieves half of its planned stake reduction in FibreCos. They also pointed out the company’s path to double-digit unlevered free cash flow (FCF) yields as a positive factor.
Operational momentum and cost-cutting measures are expected to help Zegona Communications offset pressures from Spanish competition. The analysts also mentioned potential FCF upside from further cost reductions, interest cost savings, and steps to improve mobile returns.
The progress on FibreCos in the next two months is identified as a key catalyst for the company. The analysts project a 10% unlevered FCF yield by 2026, along with a 17% dividend yield.
Deutsche Bank’s initiation of coverage with a Buy rating reflects confidence in Zegona Communications’ strategic initiatives and financial outlook.
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