Following strong gains on Friday after reaching a deal with regulator Ofcom on the separation of its infrastructure business Openreach, BT Group PLC (LON:BT.A) ran into some profit-taking today despite further positive broker comment.
In early afternoon trading, BT shares on the FTSE 100 index were down over 2%, or 7.25p at 335.2p having jumped almost 4% higher on Friday.
In a note to clients published today, analysts at Barclays Capital reiterated an ‘overweight’ stance on BT Group with an unchanged price target of 475p.
They said: “Regulatory overhangs (and specifically Legal Separation) have been a principal focus of late, and as such BT and Ofcom's settlement on Friday removes a significant obstacle towards unlocking our 40%+ price target upside.
“BT has succeeded in negotiating a legal separation without material costs (which had been feared) by keeping the network assets inside BT.”
The analysts added: “Furthermore we believe that within the upcoming Wholesale Local Access review Ofcom may change direction in looking to stimulate investment rather than just cut price.
“We derisked our capex estimates last year, and thus see higher capex fears as largely overdone.”
Common sense prevailed …
HSBC also remained upbeat on BT shares in the wake of the “positive” Openreach news, reiterating a ‘buy’ rating and 425p price target.
The bank’s analysts said: “Our read of the compromise reached between BT and Ofcom is that the company has successfully defended its position, and that common sense has prevailed.
“Indeed, the terms agreed would appear to closely match what management had already proposed to the regulator.”