TalkTalk slides as Barclays downgrades on lack of earnings potential

TalkTalk Telecom led the fallers in the index on Friday after it received a downgrade to ‘equal weight’ from ‘overweight’ by analysts at Barclays.

According to the research note released on Friday, Barclays said that the company’s focus on growing its customer base and shifting of its mobile strategy rather than on earnings growth were also key factors for the downgrade.

Upcoming interim results are not expected to indicate any significant change in earnings trajectory due to the above areas being management's main focus points, even though revenue is likely to grow.

"As such, we believe upside potential could come from fibre co-investment or fixed-mobile M&A optionality, which we see as unlikely any time soon."

Analysts at the bank, even when they raised their target price to 215p from 185p on March 2019 earnings forecasts, they still saw no upside.

TalkTalk does offer some upside potential in relation to its M&A options, but its balance sheet may not allow for such an approach.

“We would see TalkTalk as a natural co-investment partner of Openreach in an FTTP world and the company has already made initial forays into FTTP investment. TalkTalk has not indicated any firm stance.”

The telecom firm’s share price was down 5.60% to 205.80 as of 11:50 BST in response to the lowering of its recommendation.