JPMorgan says European telecom stocks may be in the middle of a long-awaited comeback, with the sector up 73% since January 2024 after more than a decade of chronic underperformance.
That run, the bank's analysts reckon, is roughly twice the gain of the broader market and trails only banks, which have surged 128% over the same period. Even so, JPM cautioned that this year’s 21% advance has been flattered by defensive market rotation as investors look for shelter from a growing list of macro risks, including Iran, AI, private credit and energy inflation.
Near-term performance could remain heavily tied to the wider macro backdrop, but the bank said its longer-term bullish thesis is unchanged.
“Our conviction in the long-term sector buy-case remains resolute,” analysts wrote, while urging investors to become more selective after the rally.
JPM said the recent “flight to quality” has left Swisscom, Elisa and KPN looking overbought, and it continues to prefer operators with cheaper valuations, stronger catalyst pipelines, double-digit EPS or EFCF growth profiles, and exposure to consolidation in their domestic markets.
Against that backdrop, its preferred names into financial year-end are BT Group PLC (LSE:BT.A), Bouygues, Orange, SES, Tele2, Telia and Deutsche Telekom, while BT, Bouygues, Orange and SES are flagged as having blue-sky potential to double over the medium term.