Mixed Performance and Moderate Growth Expectations Lead to Hold Rating for BCE

Analyst Aravinda Galappatthige of Canaccord Genuity maintained a Hold rating on BCE, reducing the price target to C$32.00.

Aravinda Galappatthige has given his Hold rating due to a combination of factors influencing BCE’s performance. The company’s Q2 results showed mixed signals, with better-than-expected EBITDA and free cash flow (FCF), but weaker broadband subscriber trends. While consolidated revenue grew by 1.3% year-over-year, driven by equipment and wireless service revenue, the adjusted EBITDA slightly declined by 0.9% year-over-year, although it surpassed expectations.
Despite some positive aspects, such as the improvement in postpaid mobile net additions and a reduction in churn rates, the wireline segment underperformed with lower broadband net additions than anticipated. Additionally, while media revenues and EBITDA showed strong growth, the overall adjusted earnings per share fell short of estimates due to foreign exchange losses and higher interest expenses. These mixed results, along with moderate growth expectations for revenue and EBITDA, underpin the Hold rating, suggesting a cautious approach to BCE’s stock at this time.

In another report released on August 5, BMO Capital also initiated coverage with a Hold rating on the stock with a C$35.00 price target.