Credit Suisse hangs up on TalkTalk

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Credit Suisse hangs up on TalkTalk

Wed, 12 July 2017
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Credit Suisse hangs up on TalkTalk

(ShareCast News) - Analysts at Credit Suisse slashed their target price for Talk Talk's shares after the company's latest full-year numbers and the change in strategy from the company's new management.
In a research note sent to clients, analyst Paul Sidney said those two factors drove him to cut his estimates for the company's earnings before interest, taxes, depreciation and amortisation over 2018 to 2021 by roughly 20%.

Hence the reduction in his target price from 260p to 210p, although he kept his recommendation on the shares at 'outperform'.

Talk Talk was now targeting an expansion of its core broadband base and a return to revenue growth, shifting away from projects requiring a lot of capital, such as its "inside-out mobile network" strategy, Sidney said.

While that new focus might boost its top-line, the impact was offset by lower expectations for Corporate sales.

It also entailed higher subscriber acquisition costs, higher churn as Britain's broadband markets turned more competitive and lower cost benefits from a move to an inside-out mobile network.

At his new target price the stock would trade at an estimated 2019 free cash flow yield of 7.1%, in-line with its sector.