In a report released today, Sebastiano Petti from J.P. Morgan downgraded Telus to a Sell, with a price target of C$19.00.
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Sebastiano Petti has given his Sell rating due to a combination of factors impacting Telus’s financial outlook. One of the primary concerns is the sustainability of Telus’s dividend growth, which is expected to exceed 100% of free cash flow through 2030, raising doubts about its long-term viability. Additionally, Telus faces slower growth in its TTech and consolidated EBITDA despite potential synergies from Telus Digital, along with increased competition and potential market share losses in Western Canada due to aggressive moves by Quebecor and BCE.
Another factor contributing to the Sell rating is Telus’s premium valuation compared to its peers, BCE and Rogers, which makes it less attractive to investors. Furthermore, there are questions surrounding Telus’s capital allocation strategy, particularly given its current leverage and the need for asset sales to meet future targets. The company’s ongoing investments and acquisitions, such as those in the Health segment, add to the uncertainty, as the long-term value and growth potential in this area remain unclear. These factors collectively contribute to the cautious outlook on Telus’s stock performance.
According to TipRanks, Petti is a 3-star analyst with an average return of 4.0% and a 55.65% success rate. Petti covers the Communication Services sector, focusing on stocks such as Sirius XM Holdings, AT&T, and Comcast.