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On Friday, UBS analysts downgraded Elisa Oyj stock (ELISA:FH) (OTC:ELMUF) from Buy to Neutral, citing concerns over slowing mobile service revenues and increased leverage. The new price target is set at €49.30, up from the previous target of €48.20.
UBS analysts noted that Elisa Oyj remains a consistent performer in the sector, operating in a well-structured European market. However, they highlighted a decline in mobile service revenue growth in Finland, which slowed from approximately 5% in 2021-2022 to 4% in 2023, and is projected to drop to 3% in 2024.
The report also mentioned an increase in postpaid customer churn and a slowdown in the Estonian market. Additionally, there has been a year-over-year decline in mobile data consumption, marking a first for the company. Despite these challenges, Elisa Oyj’s leverage has increased to 1.9 times by the end of 2024, up from 1.7 times during the fiscal years 2021-2023.
UBS analysts acknowledged that while Elisa Oyj still maintains a strong track record, the company’s current EFCF yields are less attractive compared to its Nordic peers, who are now guiding for higher EBITDA growth and offering a more appealing free cash flow profile. The downgrade reflects a cautious stance until the identified issues show signs of improvement.
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