BT shares becoming overcooked, says Deutsche Bank

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BT Group PLC (LON:BT.A) shares are becoming “overcooked” following their recovery from news of the telecoms giant’s dividend cut and spending increases from its 2020 results last May, according to analysts at Deutsche Bank.

In a note on Thursday, the investment bank downgraded the stock to ‘sell’ from ‘hold’ and retained their target price at 140p, saying that the recovery at the end of 2020 and in early 2021 of the wider FTSE index, as well as a “better outcome on the triennial pension deficit”, lower 5G spectrum costs and the conclusion of the Wholesale Fixed Telecoms Market Review by Ofcom had “all contributed to a substantial reversal of fortunes” which has left the stock seeming overcooked.

Green shoots emerging for favourable regulation, says JP Morgan

Meanwhile, while Deutsche Bank’s analysts seemed to have turned more negative on BT, JP Morgan was looking at the wider European telecoms sector in a better light.

In a sector note, the bank said there were some “green shoots” emerging of favourable regulatory change across several countries including the UK.

“Whilst it remains too early to consider this a trend, should momentum build, we think this has the potential to transform the sector’s fortunes”, analysts said.

More specifically, JP Morgan highlighted that BT and its peer Vodafone Group PLC (LON:VOD) “have begun to change their rhetoric around regulation”.

“Rather than simply complain about what is clearly a punitive regime, they have begun to strike a more constructive dialogue. Essentially operators are working hard to establish a partnership to identify common goals with governments, policymakers, and civil society, built about the key role that Telcos play in delivering a digital future. Whilst we acknowledge there remains some ongoing regulatory frustrations…there have also been some major structural “wins”, the bank said.

Shares in BT were down 2.7% at 175.6p in lunchtime trading, while Vodafone dipped 0.6% to 127p.

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