Shares of telecom player plunged over 4% to Rs 760.6 in Wednesday’s trade on BSE after global brokerages JP Morgan and BofA downgraded the stock to underperform. The stock has fallen 6.6% in the last two trading sessions.
The global investment bank JP Morgan downgraded Bharti
to underperform from overweight and slashed its target price to Rs 710 from Rs 860 earlier.
JP Morgan is of the view that delayed price recovery is likely to impact telecom players. The global investment bank expects competitive 5G rollouts to gain momentum.
“Can expect negative surprises on CAPEX while subsidies would drive adoption.
Jio’s focus has shifted to premium subscribers from entry-level,” said the note.
Also, the global brokerage firm BofA Securities has downgraded its rating on shares of Bharti Airtel to underperform from neutral as it finds the risk-reward unfavourable after the recent run-up in the scrip.
Shares of the telecom operator gained 18% in 2022 and outperformed the benchmark Nifty50 index by 14% due to its defensive characteristics, sustained market share gains, and stabilizing competitive environment.
“We consider Bharti Airtel’s valuation as rich and see limited margin of safety. Inflation and INR-depreciation headwinds could impact demand and lead to higher capex/interest payments going ahead,” the foreign brokerage BofA said in a note to its clients.Bharti Airtel is trading at 9.5 times its operating profit of FY23, compared to the average of 6.6 times the valuation of Asian telecom companies.
BofA Securities sees risks of competition intensifying as rival Reliance Jio Infocomm is getting aggressive in the postpaid market, where Bharti Airtel has a stronghold. Airtel is improving its footprint in tier-3-4 cities where Jio has a stronghold.
Citing the downside risks to earnings, BofA has cut the earnings per share (EPS) estimates for FY24 and FY25 due to the slower-than-expected net addition of subscribers, lower margins and interest expenses.
As a result, the 12-month price target for the stock has been slashed to Rs 700, implying a potential downside of 9% from the current levels. The stock was trading 3.3% down at Rs 767 on the BSE.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
