Deutsche Bank has cut its target for BT Group PLC (LON:BT.A) and reiterated a ‘sell’ rating on the stock in a preview of the telecom blue-chips impending third-quarter results, noting that “the share price has fallen but risks have risen.”
The German bank’s analysts have reduced their target price for the FTSE 100-listed firm to 157p, down from 169p previously, with the shares currently trading at 174.56p, up 0.3% on Tuesday’s close. BT will deliver its Q3 update on Thursday.
In a note to clients, Deutsche Bank’s analysts pointed out that in late October – when the stock was trading at 208p - they said that BT's share price "bounce on Brexit was an oppo to exit (ahead of a capex and infra competition hike) ".
They reiterated the view in early December – when the stock was trading at 85p - that whilst 'Election and regulatory progression may help, the FTTH hazard remains'.
The analysts said: “Since then, a landslide election has helped underpin UK prospects and reduce domestic uncertainty to which BT is substantially exposed.
“Further, a regulatory announcement containing a number of 'helps' for BT's fibre plans was announced in early Jan, though we felt that the underlining regulatory and govt objectives for increased full-fibre infrastructure competition are far from supportive.”
But, the analysts noted that one key negative catalyst - at least to their thinking - is the funding of FibreNation's 3mln home-build project, announced by CityFibre last week, although this has been somewhat shrugged off by those sceptical of CityFibre’s new 8mln home targets.
The Deutsche analysts also noted that a further threat has emerged on the alt-FTTH (Fibre To the Home) front with various press this week reporting that Virgin Media is considering expanding its network footprint via an off-balance sheet vehicle, Liberty Networks.
This has left them cautious on BT Group shares.