Orange Shares Head Higher Following Credit Suisse Upgrade
Credit Suisse expects Orange SA (ADR) (NYSE: ORAN) to gain from its investment in fibre to the home (FITH) concept compared to its rivals, which have invested in fibre to the cabinet (FTTC). The firm believes there are risk factors in FTTC, with the possibility of increasing capex for faster broadband.
However, Orange does not face such a risk factor, citing that the company faces the lowest line loss among the big telecom service providers. Therefore, analysts Jakob Bluestone and Justin Funnell preferred to upgrade the stock from Neutral to an Outperform rating and boosted the price objective from €15 to €16.50.
The brokerage pointed out that Orange is already delivering some of the best KPIs in fixed line supported by stable access lines and increasing retail prices due to its investment in FTTH that enables it stabilizes its market share. The firm believes rivals are no match to Orange's commitment level despite competitors' attempt to co-invest on attractive terms.
Credit Suisse sees Orange maintaining its lead over Lliad in 2017 pointing out the latter's 4G coverage, which is still way behind while 3G faces speed issues. Therefore, the firm does not expect risks from mobile to worsen significantly though there could be modest erosion of revenue.
In a research note, the brokerage said, "We are slightly ahead of consensus, in contrast with our below-consensus earnings forecasts for other big cap telcos. Orange is the major incumbent where we are furthest ahead of consensus EBITDA in 2018. Whilst Orange trades on a 6 percent FCFY in line with the sector, this includes capex/sales of 20 percent in France — the cost of rolling out FTTH."
Therefore, the analysts see more sustainable FCF yield from Orange compared to rivals.
The stock traded at $15.50, up $0.33, or 2.18 percent, in the pre-market trading on Tuesday.
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Latest Ratings for ORAN
|Sep 2016||Credit Suisse||Upgrades||Neutral||Outperform|
|Aug 2016||Bank of America||Downgrades||Buy||Neutral|
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