BCE has price target cut by Scotia Capital

Thinking of investing in Canada’s telco sector? You might want to pause on that idea.

That’s the opinion of Scotia Capital analyst Maher Yaghi who trimmed his price targets on Quebecor, Rogers, Telus and BCE (BCE Stock Quote, Chart, News, Analysts, Financials TSX:BCE) Tuesday.

As reported by the Globe and Mail November 26, the analyst thinks the sector faces headwinds that aren’t being priced into the stocks.

“Current consensus estimates imply a view that wireless pressure should peak late this year with the rate of decline improving in 2025 with wireless ARPU [average revenue per user] only declining by 0 to 1 per cent year-over-year in 2025 on average for incumbents,” Yaghi wrote. “In a market where the CRTC continues to scrutinize wireless pricing and Freedom Mobile calling out incumbents in public such as their petition last week, we see little probability of a quick improvement in pricing. Our consolidated EBITDA forecasts imply 1 to 3-per-cent lower growth for 2025 vs consensus. This lower growth expectation is due to lower wireless ARPU and loading forecasts. We have lowered some of our valuation multiples and short/medium term DCF growth assumptions leading to lower target prices. We continue to believe that a more grounded street expectation on pricing is needed to put a long term bottom on stock valuations.”

In a research update to clients, Yahgi cut his price target on BCE from $45.00 to $42.00. The stock closed November 25 at 37.81.

On November 7, BCE reported its Q3, 2024 results. The company posted Adjusted EBITDA of $2.72-billion on revenue of $5.97-billion, a topline that was down 1.8% year-over-year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” CEO Mirko Bibic said. “Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition. Our results demonstrate the success of this approach with 2.1% adjusted EBITDA growth and our highest adjusted EBITDA margin since the early 1990’s of 45.6%.”

On November 4, BCE announced that it would acquire U.S.-based Ziply Fiber, an ISP that operates in the Pacific Northwest, for approximately $7-billion. The move followed the big news of September 18, when BCE announced that it had agreed to sell its stake in Maple Leaf Sports and Entertainment to Rogers Communications for $4.7-billion.