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Investing.com -- Deutsche Bank has downgraded Telenor ASA (OL:TEL) to a "hold" rating from "buy," citing a 26% year-to-date outperformance relative to the sector.
The brokerage’s revised target price for the stock is NOK 163, up from NOK 154. In April 2024, Deutsche Bank had upgraded Telenor to "buy," anticipating strong operational performance.
However, the recent share price surge has led to a reassessment. The brokerage now views the valuation as less compelling, with the 2027 estimated unlevered free cash flow (FCF) yield at 5.5%. Emerging markets account for 40% of Telenor’s group FCF.
Consolidation prospects, particularly in Sweden, have been a significant driver of Telenor’s share price.
Deutsche Bank’s M&A analysis suggests a potential 5-9% accretion to FCF per share from a Swedish deal.
However, with the recent rally in Telenor’s stock, the brokerage believes the market has already priced in these consolidation prospects.