Rogers Communications Surges Amid Canaccord Upgrade

Canaccord upgraded Rogers Communications Inc. (USA) RCI to Buy with a C$46.00 price target in a report issued Sunday.

Analysts Dvai Ghose and Sanford Lee observed that "RCI shares have underperformed YTD due to operational issues and wireless regulatory risk. While we do not agree with all of RCI’s strategies, 1) wireless ARPU recovery may upside surprise; 2) it is addressing its service issues; 3) wireless regulatory risk seems overblown; and 4) it has limited TV exposure."

Ghose noted that investors may need to be patient due to "significant near term headwinds including: 1) wireless and TV regulatory risk; 2) poor customer service and relatively high churn; 3) a declining video base due to the Bell IPTV threat and cord-cutting; 4) potential inability to fully monetize the $5.2 billion NHL deal; 5) a questionable proprietary IPTV overlay strategy; and 6) relatively high debt leverage."

The report concluded that the firm’s "unchanged SOTP derived C$46.00 price target implies an EV of 7.1x 2015E adjusted EBITDA minus 2015E year-end net debt."

Rogers Communications Inc. (USA) recently traded at $38.80, up 3.49 percent.