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Thursday’s trading session saw Deutsche Telekom (DTE:GR) (OTC: OTC:DTEGY) shares sustain their positive momentum at $33.34, trading near its 52-week high of $33.68, following a reaffirmation by JPMorgan of an Overweight rating and a price target of EUR43.00. According to InvestingPro data, the stock has delivered an impressive 27.74% return over the past six months, reflecting strong market confidence in this $164.34 billion market cap telecommunications giant. The endorsement comes in the wake of robust fourth-quarter results from T-Mobile US (NASDAQ:TMUS), which is partly owned by Deutsche Telekom. T-Mobile’s shares surged by 6%, while Deutsche Telekom enjoyed a 5% lift.
The impressive quarterly figures from T-Mobile US showcased record growth rates with year-over-year increases of 7% in revenues, 10% in EBITDA, and an outstanding 54% in EPS. Additionally, the guidance for 2025 exceeded expectations in terms of wireless customer additions and cash flow, dispelling concerns over a potential slowdown in momentum.
In response to these results, JPMorgan analysts have updated their estimates for T-Mobile US, raising projections for revenues and EBITDA by 2% per annum and EPS and EFCF by mid-single digits. Despite a slight reduction due to foreign exchange considerations, Deutsche Telekom’s group revenues are still expected to grow by less than 1% per annum, with EBITDA increasing by 1% per annum, EPS by 4% per annum, and EFCF by 1-3% per annum.
The analysts at JPMorgan expressed continued confidence in Deutsche Telekom, reiterating the Overweight rating. They highlighted that, even after the stock’s 165% increase over the past five years and a 12% rise year-to-date, the company’s prospects remain strong. InvestingPro analysis supports this view, showing the company maintains a "GREAT" financial health score of 3.02, with particularly strong marks in profit and price momentum metrics. The company has also demonstrated remarkable stability, maintaining dividend payments for 20 consecutive years. JPMorgan’s forecasts for Deutsche Telekom’s EPS compound annual growth rate (CAGR) from 2023 to 2027 are 16%, which is 16% higher than the company consensus.
Deutsche Telekom stands out as one of only ten European large-cap companies to offer a double-digit EPS growth outlook. With a current P/E ratio of 26.55x and an impressive free cash flow yield of 19%, the company presents an interesting value proposition. InvestingPro subscribers can access 13 additional key insights and a comprehensive Pro Research Report, offering deep-dive analysis of Deutsche Telekom’s financial health, valuation metrics, and growth prospects among the 1,400+ stocks covered by detailed research reports. The analysts also noted Deutsche Telekom’s successful track record in mergers and acquisitions, with the potential for further upgrades as T-Mobile US’s $10 billion worth of acquisitions in the US are expected to receive progressive approval by 2025. Additionally, they pointed out that both T-Mobile US and Deutsche Telekom possess considerable balance sheet strength for future endeavors.
In other recent news, Deutsche Telekom has been the focus of positive analyst attention and robust financial performance. Citi analysts have raised their price target for the telecommunications giant from EUR33.00 to EUR34.00, maintaining a Buy rating. This follows a comprehensive review of the company’s financial model in anticipation of the fourth-quarter 2024 results. Likewise, Bernstein SocGen Group increased Deutsche Telekom’s price target from EUR32.00 to EUR38.00, maintaining an Outperform rating, reflecting 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. This move comes after the company’s shares experienced a decline, creating an opportune moment for investors to engage with a company with significant exposure to the U.S. market.
In terms of financial performance, 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. The company also upgraded its full-year guidance to €43 billion and 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. These recent developments underscore the company’s solid financial performance and favorable outlook.
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