Investors hung up on Talktalk Telecom Group PLC (LON:TALK) on Wednesday as Exane BNP Paribas slashed its estimates, dividend forecast, and price target for the broadband and telecoms provider, saying in a ‘bear case’ scenario the shares could be worth just 30p each.
In a review of the UK telcos, the French broker chopped its target price for the FTSE 250 listed firm back by 35% to 90p, down from 140p previously, helping the stock to drop by over 8% to 119.7p in late afternoon trading, although that was off the session low of 107.4p.
READ: City broker reckons TalkTalk will breach its bond covenants next year if it doesn’t chop divi by 40%
Exane’s analysts said they expect TalkTalk’s commercial recovery to stall this year, leading them to reduce their estimates for subscribers, revenue and underlying earnings (EBITDA), and see a dividend cut of 50%.
They said growth in the discount market has been a positive driver behind the group's recent commercial improvement, but this is likely to be short-lived as other operators are making bigger inroads into their value niche.
The analysts said: “Ultimately this means TalkTalk will, in our view, continue to disappoint on the revenue front, putting pressure on commercial spend, and ultimately leading to further disappointment on EBITDA."