Morgan Stanley believes BT Group PLC (LON:BT.A) shares look “cheap on a sum-of-the-parts valuation” but it is “cautious about stepping in too early before we have greater clarity on capex, content rights, pension and dividend.”
In a note to clients, the US investment bank maintained its ‘equal-weight’ rating on the blue chip telecoms giant but cut its price target back to 290p from 320p.
READ: BT Group has failed to grasp the fibre nettle, says Deutsche Bank
In late morning trading on Thursday, BT shares were changing hands at 260p each, up 1.8%, or 4.6p on last night’s close.
The Morgan Stanley analysts noted that BT's shares are down around 50% from their highs of late 2015.
They said: “Marking to market BT's divisions (7.5% premium to regulated asset value for Openreach, and 12x OpFCF for the remaining business units) could drive a share price of 340p (or ~35% upside potential).”
“However,” analysts added, “the timing on such value creation is very uncertain. We expect the share price to continue to remain subdued until the issues around capex, content costs, pension and dividend are further clarified.”