RCI.B stock wins price target raise at Scotia

Its contentious relationship with Cogeco in the rear-view mirror, Scotia analyst Maher Yaghi has raised his price target on Rogers Communications (Rogers Communications Stock Quote, Chart, News, Analysts, Financials TSX:RCI.B)

Earlier this week, Rogers announced it had sold its stake in Cogeco to the largest pension fund manager in Quebec, CDPQ, for $829-million.

“This sale further demonstrates our commitment to strengthen our investment grade balance sheet and aggressively reduce our debt leverage ratio,” Rogers CEO Tony Staffieri said.

As reported by The Globe and Mail, Yahgi December 14 raised his price target on Rogers from $69.50 to $74.50, maintaining his “Sector Outperform” rating on the stock.

The analyst explained the reasoning behind the move.

“The two-decade serenade ended on Monday when Rogers found an anchor buyer for its stake in Cogeco,” the analyst wrote. “We are not surprised as Rogers has other priorities after acquiring Shaw’s cable business. We adjusted our target prices to reflect the impact of the transaction while also taking the opportunity to adjust our assumed long-term cost of debt given the recent decline in 10-year rates reducing our risk-free rate to 3.7 per cent from 4.1 per cent for both stocks. While we have not made any changes to our operational KPIs, we believe this sale could spawn a more aggressive approach that Rogers could take against Cogeco. Two strategies could be in the cards, the first is extending Rogers’ cable footprint into Cogeco’s territory and the second a more direct competition with FWA. Rogers has brand recognition and now a strong spectrum position in southern Ontario which could be used to attack the low end of the broadband market. While this could take some time to play out, we believe investors should keep an eye on this. We continue to favor Rogers and TELUS (Sector Outperform) as our best picks in Canadian telecom heading into 2024.”

Shares of Rogers on the TSX closed December 13 at $62.44.