Shares in TalkTalk Telecom (LON:TALK) fell 3% early on after Goldman Sachs cut the stock to ‘sell’ and dropped its price target.
In a note entitled Growth Priced In, Not Competition, the Wall Street Bank said the stock’s premium to the European telecoms sector was unsustainable even if its focus on growth over cash is “sensible”.
“We see profitability as relatively low in the mid-term particularly relative to the wider EU telco universe,” Goldman said in a sector note.
“In addition, TalkTalk is scaling back its mobile plans and clearly cited it wants some pricing differential at the low end of the market in fixed.
“We believe this presents a risk that TalkTalk needs to further lower pricing in order to drive sustained subscriber growth.”
The investment bank dropped its price target to 150p from 190p while moving from a ‘neutral’ recommendation.
At 10.45am, stock in the company was changing hands for 177.64p, down 5.26p on the day.
Of the 13 analysts logged as following TalkTalk by the Brokerforecasts site, six are in the ‘sell’ camp along with Goldman, there five ‘buyers’, with remainder seeing the stock as fully valued.
The Goldman note also contained analysis of BT Group plc (LON:BT.), which it keeps on a ‘neutral’ rating. The price target is cut 10p to 340p a share.