BROKERWATCH Telecom Italia price target cut to 1.6 eur at Morgan Stanley

Δημοσιεύθηκε: 26 Μαρτίου 2008 - 09:42

MILAN (Thomson Financial) - Morgan Stanley has cut by 23 pct its target price on Telecom Italia SpA to 1.60 eur per share and confirmed its 'underweight' stance on the stock as it believes confidence in the share will require several quarters of execution to recover with loss of high margin revenue set to continue due to mobile substitution, competition and regulatory pressure.

According to the broker, Telecom Italia shares offer 30 pct upside to its price objective, against a 40 pct upside for the weighted average of the telecommunications sector.

'For 2009 and 2010, sectorial risks to mobile termination rates (MTR) and SMS could weigh on EBITDA, and are amplified by Telecom Italia's high leverage. Therefore, newsflow on MTRs in particular could form a barrier to recovery,' the broker said.

Separately, Lehman Brothers also confirmed its 'underweight' stance on the stock with a 1.60 eur target price.

'There should be headroom in the 2008 plan but whether this headroom is sufficient will likely be unclear to all, including management,' the broker said.

'We believe it is too early to price in business stabilisation given low visibility and no detailed transformation plan before year-end... The deterioration of Telecom Italia's credit status points to further headwinds for earnings and a strategic recapitalisation is a relevant option, in our view,' Lehman Brothers added.

The broker also reduced its EBITDA estimates for 2008 by 6.3 pct and by 7.6 pct in 2009 and earnings per share by 14.9 pct this year and 12.5 pct next year.

At 10.35 am, Telecom Italia shares were up 1.64 pct at 1.365 eur while the blue-chip S&P/Mib index was off 0.65 pct at 31,247 and the Euro Stoxx telecommunications sector index inched up 0.17 pct.

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