Shaw Communications has price target trimmed at Echelon Wealth, maintains “Buy” rating

Following the company’s first quarter results, Echelon Wealth Partners has lowered its price target on Shaw Communications (Shaw Communications Stock Quote, Chart TSX:SJR.B), though the bank is maintaining its “Buy” rating on the stock.

On Thursday, Shaw reported its Q3, 2019 results. The company earned $229-million on revenue of $1.32-billion, a topline that was up 2.7 per cent over the same period last year.

“Freedom Mobile maintained its strong momentum in the quarter, growing wireless subscribers and operating margin,” CEO Brad Shaw said. “We are reaching more Canadians with our affordable data-centric plans, expanded retail and consumer friendly practices, all of which are changing the competitive landscape. The deployment of low band spectrum is significantly enhancing the customer experience and consistently reducing churn. With our successful acquisition of 600-megahertz spectrum across our entire wireless operating footprint, we can continue to improve our network experience and provide affordable options for our customers.”

Goff sees some competition on the horizon.

“We see Freedom’s longstanding Big Gig 10GB plan to be challenged by the recently introduced competitive plans by all three national carries where Rogers was the first one to move the needle. Management noted however, that momentum has remained strong at Freedom,” he says.

In a research update to clients today, Goff maintained his “Buy” rating on Shaw but lowered his one-year price target from $32.00 to $31.00, implying a return of 20.4 per cent at the time of publication.

The analyst thinks Shaw will post EBITDA of $2.17-billion on revenue of $5.38-billion in fiscal 2019.

“We reiterate our Buy rating while adjusting our PT from $32 to $31/shr while taking modest reductions of $33.8M (including the $15M IP charge) and $13.9M to our F2019/20 EBITDA,” the analyst explained. “We are encouraged by the increase in the high value, high-margin wireless adds and improvement in ARPU/ABPU that support F2019 wireless EBITDA growth of 38.5% y/y using our $205.0M forecast. While wireless tends to be a focus, the emerging market discipline for wired with efficiency savings (Estimated OpEx savings are upped to $95M from earlier estimates of $83M for F2019) and an impressive product roadmap (drawn by Comcast)) strengthens our bullish outlook.”

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