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On Monday, UBS analyst Polo Tang increased the price target for Deutsche Telekom (OTC:DTEGY) shares to €37.70, up from the previous €37.00, while reaffirming a Buy rating on the stock. The adjustment follows the company’s fourth-quarter results, with the revised target reflecting a balance between a higher market valuation for T-Mobile US (NASDAQ:TMUS) and the impact of foreign exchange rates. The telecommunications giant, with a market capitalization of $180.92 billion, is currently trading near its 52-week high of $37.74, according to InvestingPro data.
Tang noted that despite currency fluctuations leading to an estimated 4-5% decrease in mid-term earnings per share (EPS), Deutsche Telekom is trading at 16.7 times its expected 2025 earnings. He highlighted the company’s consistent performance and its ability to deliver an 11% per annum EPS growth, which positions it as a defensive investment with a history of being a quality compounder. InvestingPro analysis shows the company maintains an impressive track record of 21 consecutive years of dividend payments, with a current P/E ratio of 14.93x and a robust Financial Health Score rated as "GREAT."
The analyst also addressed the 7% decline in Deutsche Telekom’s share price up to last Friday, attributing more than half of this movement to the strength of the euro, which appreciated by 5% against the US dollar last week. Additionally, a sector-wide rotation out of defensive stocks led to a 4.5% devaluation in T-Mobile US, which, combined with the currency effects, explains the recent performance of Deutsche Telekom’s shares.
Looking ahead, Tang suggested that with Germany considering fiscal expansion and potential reforms to its debt brake, the likelihood of the German government selling off its 27.8% stake in Deutsche Telekom might decrease. He also pointed out that while T-Mobile US has been a significant factor in Deutsche Telekom’s share price in recent years, there could be potential for a re-rating of the company’s value excluding its US operations, especially given the year-to-date gains of 15% and 10% in the DAX and SXKP indices, respectively. The company has demonstrated strong momentum with a 59.55% return over the past year and steady revenue growth of 3.22%. For deeper insights into Deutsche Telekom’s valuation and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which includes detailed analysis of the company’s fundamentals and growth trajectory.
In other recent news, Deutsche Telekom has been the subject of several analyst updates following its financial performance and strategic developments. Citi analysts recently revised their price target for Deutsche Telekom to €39.00 from €40.00, maintaining a Buy rating despite challenges in the fourth-quarter earnings report. These challenges included issues with handset sales and IT business phasing, as well as weaker-than-expected broadband net additions in Germany. Meanwhile, JPMorgan reaffirmed its Overweight rating with a price target of €43.00, highlighting the strong growth prospects of Deutsche Telekom’s U.S. subsidiary, T-Mobile US, which reported impressive quarterly figures with notable increases in revenue and earnings.
Additionally, Citi raised its price target for Deutsche Telekom to €34.00, citing adjustments in their financial model and positive expectations for T-Mobile US’s performance. Bernstein also increased its target to €38.00, maintaining an Outperform rating due to the company’s robust growth outlook, particularly in the U.S. market. Deutsche Telekom’s consistent performance and strategic moves, such as the recent deal with UScellular, are expected to bolster its position in rural markets and drive further growth.
These developments reflect a positive outlook from analysts, who emphasize Deutsche Telekom’s potential for multi-year earnings growth and strong fundamentals. Despite some macroeconomic challenges and FX fluctuations, the company is seen as a standout performer in the telecommunications sector. The various analyst updates underscore confidence in Deutsche Telekom’s growth trajectory and strategic initiatives, positioning it favorably within the industry.
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