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Hold Rating for SK Telecom Amidst Operational Growth and Strategic Challenges

Hold Rating for SK Telecom Amidst Operational Growth and Strategic Challenges

Sk Telecom (SKMResearch Report), the Communication Services sector company, was revisited by a Wall Street analyst today. Analyst Sun Jung Lee from Bank of America Securities reiterated a Hold rating on the stock and has a $25.08 price target.

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Sun Jung Lee has given his Hold rating due to a combination of factors impacting SK Telecom. The company’s operating profit for the first quarter was in line with expectations, showing year-over-year growth primarily due to reduced marketing and depreciation costs. However, a recent data breach has led to an increase in mobile number portability, which is expected to incur additional customer-retention costs and potential financial impacts, including costs for USIM replacements and possible regulatory fines.
Looking ahead, while SK Telecom is projected to achieve a modest operating profit increase by 2025, the potential for shareholder return growth appears limited. This is attributed to flat earnings per share growth and a capital allocation strategy focused on deleveraging and investments in AI and equity acquisition. Consequently, despite an undemanding valuation and a competitive dividend yield, the upside potential for shareholder returns is capped, justifying the Hold rating.

According to TipRanks, Jung Lee is ranked #3886 out of 9511 analysts.

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