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Investing.com -- Citi on Wednesday lowered Orange SA (EPA:ORAN) stock to Neutral from Buy, noting that the company’s share price has nearly approached its price target after a strong 2025 performance.
The company’s shares fell more than 1% in European trading.
The stock has been one of the best performers in the European telecom sector year-to-date, partly due to intensifying discussions of possible French telecoms consolidation.
However, in order to stay positive, “we would need to take an active view of a deal happening, and resultant benefits to Orange,” Citi analysts led by Carl Murdock-Smith said.
Aligning all stakeholders for such consolidation has proven difficult in the past. Citi also pointed out that the market might have already factored in the expectations of a potential deal into Orange’s current share price.
Moreover, the analysts have identified a common oversight in consensus estimates, which tend to underestimate the growth of minority interest leakage at Orange.
The company’s EBITDAaL growth is primarily driven by its Africa & Middle East (A&ME) operations, which is roughly two-thirds owned by Orange. Despite this, the consensus predicts broadly flat minority dividends going forward.
“As such, our minority interest cost forecast is 12% higher than company-compiled consensus 2026 in the cashflow, and is 17% higher in the income statement. This is a contributing factor to us forecasting 2026E EPS 13% lower than company-compiled consensus,” analysts continued.
Citi expects the downgrade to spark potential pushbacks, including claims that Orange’s valuation remains attractive and its balance sheet is sensible.
Additionally, there are expectations that Orange France could gain from competitors facing debt issues and potentially benefit from any future market consolidation.
Citi also notes Orange France’s lower capital expenditure risk due to its extensive fibre network and the potential upside from the company’s 50% stake in MasOrange in Spain.