Berenberg lowers target price on BT

Berenberg said that over the next few weeks, it thinks that investor focus will first centre on whether BT will go ahead with its plans in mid-January and announce a roughly 14% price increase for April.

"While executing its CPI+3.9% pricing mechanism may risk a longer-term political backlash, we believe that it would initially be taken positively for the share price and lead to 2023/24 consensus upgrades in Consumer EBITDA," said Berenberg.

The German bank also pointed out that BT then reports Q3 results on 2 February, which it believes will leave a lot for the group to do in Q4 to achieve full-year guidance.

"We forecast 0.4% EBITDA growth yoy (H1: +2% on a BT Sport joint venture pro-forma basis). To then hit its guided £7.9bn EBITDA for 2022/23, BT will have to grow Q4 EBITDA by +5.5%, this despite the additional headwind of BT putting through an early £1,500 pay increase for employees from January 2023," said Berenberg, which reiterated its 'hold' rating on the stock.

"We believe the guidance will be achieved, albeit possibly by the 'EBITDA underpin' in BT's bonus scorecard being enacted, which we would view as low quality. Regardless, we expect investor doubts about BT's guidance to increase after Q3."

Reporting by Iain Gilbert at Sharecast.com