
He has become more bearish on Canadian telco stocks in general, but Desjardins Securities analyst Jerome Dubreuil thinks Rogers Communications (Rogers Stock Quote, Chart, News, Analysts, Financials TSX:RCI.B) in particular might have a tough go of things in 2025.
Last September, Rogers Communications acquired BCE’s 37.5% stake in Maple Leaf Sports and Entertainment for CA$4.7 billion. The analyst says there are still doubts whether the large investments in sports will pay off and there are lingering balance sheet issues.
““RCI’s infrastructure deal with Blackstone was initially expected to close before the end of 2024, but we are uncertain whether the deal will close before the company reports 4Q24 results on January 30,” the analyst said. “We have now pushed the financial impact of the potential transaction in our model to 1Q25 from 4Q24. We believe the company will not complete this transaction if credit agencies do not grant RCI the equity treatment for the instrument. It is our understanding that it would be ideal for the infrastructure deal to close several months before the closing of the MLSE deal (expected in mid-2025). Indeed, should the infrastructure deal collapse, the company would need to set up another type of financing, which could include the issuance of hybrid securities or an accelerated sale of minority stakes in MLSE.”
As reported by the Globe and Mail, Dubreuil today maintained his “Buy” rating while cutting his price target on Rogers from $60.00 to $49.00. The stock closed January 27th at $41.75.
”Earlier in January, RCI reduced its 2024 service revenue growth guidance to ‘just over 7 per cent’ from 8–10 per cent, citing media weakness,” the analyst added. “We lowered our 4Q top-line growth expectation for media to 0 per cent from 6 per cent, which translates into a 0.2-per-cent impact on annual consolidated revenue. We highlight that 2024 revenue consensus was already below RCI’s service revenue growth guidance. For 2025, we have lowered the pace of improvement in cable pricing, reflecting sustained competition in wireline services. We have also shifted more wireless net adds to prepaid from postpaid to better align with recent trends in loadings. We expect the market will closely monitor cable revenue in 4Q24 as the company has long guided to a return to growth in this quarter—we forecast 0.9-per-cent year-over-year growth in cable. Finally, we have removed the MLSE financials from our forecast given the uncertainty about the closing date for the MLSE deal—we still carry MLSE in our NAV.”
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