UniCredit Bank Reiterates its BUY Rating on Telefonica, Target Price Reduced

October 10 00:00 2011

LONDON, October 10, (RainbowNewsLine.com) – Analysts at UniCredit Equity Research have reiterated their BUY rating on shares of Telefonica (NYSE: TEF). The target price has been reduced from €22.00 to €17.00.

In a research note published on October 7, the analysts mention that the reduction in the target price is to reflect the changes in forecasts following the spectrum auction in Spain. Telefonica can afford shareholder’s remuneration of €1.60 & €1.75 for FY11E & FY12E under the new forecast evaluation, the analysts say.

Telefonica is due reporting its 3Q’11 on 11 November, the company is expected to present a profit stabilization in domestic market, confident trends in LatAm, and leveled trend in Europe, the analysts mention. Spain and Europe were reviewed on more cautious assumptions, while increasing their forecast for LatAm due to strong support of Viva’s recent strong performance.

Group level revenue is expected to be up by 4.7% yoy (EUR 15.9 billion), Spain and Europe to be down 7.7% & 1.1% yoy, respectively and LatAm to be up 18% yoy, the analysts add.TEF’s shares are trading at a P/E discount of  ca. 9% to peers and the dividend yield is expected to be 11.0% & 12.1% in 2011 & 2012 against 9% of the sector. S&P expects the stock to trigger when 3Q’11 results will be out on 11 November and to support deleverage by disposing non-core assets.