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Investing.com - JPMorgan downgraded Telefonica (BME:TEF) Brasil SA (NYSE:VIV) from Neutral to Underweight on Friday, while raising its price target to BRL28.50 from BRL26.00. The stock, which has surged 66% year-to-date and trades near its 52-week high of $12.17, currently maintains a "GREAT" financial health score according to InvestingPro analysis.
The investment bank adjusted its estimates for the Brazilian telecommunications company, reducing EBITDA forecasts by 1.3% and 1.6% for 2025 and 2026, respectively. More significantly, JPMorgan cut earnings estimates by 12.1% for 2025 and 11.7% for 2026. The company currently trades at a P/E ratio of 17.57x, which InvestingPro data suggests is relatively high compared to its near-term earnings growth potential.
These revised projections suggest approximately 7% downside risk to Bloomberg consensus earnings estimates for both 2025 and 2026, which JPMorgan noted are closely followed by investors as earnings drive dividend decisions.
JPMorgan cited relative valuation concerns in its downgrade rationale, describing Telefonica Brasil as "the most expensive mature LatAm telco." The firm noted the company trades at 9.4x EV/OpFCF for 2026E while projecting only 4.1% OpFCF CAGR for 2026-2029.
The new price target of BRL28.50 is based on a December 2026 timeframe, compared to the previous December 2025 target of BRL26.00, reflecting JPMorgan’s updated valuation model despite the rating downgrade.
In other recent news, Telefonica Brasil announced the cancellation of 34,740,770 common shares previously held in treasury. This move represents 1.07% of the company’s capital stock and was part of its share buyback program. Importantly, the cancellation does not affect the company’s overall capital value. As a result, Telefonica Brasil’s capital stock now comprises 3,226,546,622 common shares. The company plans to convene a shareholders’ general meeting to amend its bylaws to reflect this updated share total. These developments are part of Telefonica Brasil’s ongoing efforts to adjust its capital structure.
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