On Wednesday, BofA Securities adjusted its stance on Telenor ASA (TEL:NO) (OTC: OTC:TELNY) stock, upgrading from Neutral to Buy. The firm set a new price target of NOK142.00, a slight increase from the previous NOK141.00. The upgrade reflects BofA Securities' positive outlook on the company's risk-reward balance, despite certain uncertainties.
The analyst from BofA Securities highlighted several factors contributing to the upgrade. Telenor's strong positioning in the Nordics is expected to drive an annual EBITDA growth of over 4% from 2024 to 2026. Additionally, the anticipated capital expenditure relief next year and the upcoming decommissioning of copper networks are seen as positive developments.
In Asia, the consolidation efforts in Thailand and Malaysia are viewed as successful, although the firm noted that Telenor's potential exit from these markets could simplify its business structure. Despite some management changes and the forecast that dividend coverage will only commence from 2026, the fundamentals of the company are considered robust.
BofA Securities also took a closer look at Telenor's proportionally owned free cash flow (FCF). The valuation was deemed attractive, with an expected yield of 7.5-9.8% from 2025 to 2027. This yield could potentially increase to 8-9% if Telenor decides to exit its Asian markets.
The upgrade comes amid a broader assessment of Telenor's financial outlook and market position. The new price target suggests a modest upside from the previous target, indicating a belief in the company's steady growth prospects.
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