TalkTalk slumps as Citi cuts price target

TalkTalk was under pressure as Citigroup cut its price target on the stock to 150p from 230p and kept the stock at ‘neutral’ saying it was still too risky.

The bank said the fall in the target price was due to cutting cash flow forecasts given lower earnings before interest, taxes, depreciation and amortisation and higher capex, and as it takes into account higher net debt coming into the forecast period.

Citi said TalkTalk's first-half results showed net debt continuing to rise rapidly while revenue fell and shifted further into wholesale, undermining gross margin.

It pointed out that the group was forced to add a £75m receivables purchase agreement to improve its facilities headroom but noted the majority of its credit arrangements expire within three years.

“A lot now rests on its October consumer relaunch of more competitive plans for new customers alongside a chunky price rise for the base. We expect the dividend to halve year-on-year in FY18 and see downside risk to consensus.”

Citi expects £302m for FY17 EBITDA, below revised guidance at the lower end of a £320m-£360m range.

At 0853 GMT, the shares were down 3.1% to 151.21p.