HOME ZACKS RESEARCH FUNDS PORTFOLIO BROKER RESEARCH MARKETS SCREENING EDUCATION SERVICES
Zacks Rank    Equity Research    Premium Home    My Account    Help    

Portfolio Tracker
Get an update on your stocks every day. See earnings revisions, new reports and Zacks Rank changes at a glance. Click here to learn more.
Quote:
Login Free Membership
Search:

 
Analyst Blog  

France Telecom Still Ringing

August 26, 2008 | Comments: 0
Recommended this article (1)
FTE
Print    Share

We remain buyers of France Telecom (FTE - Analyst Report). Improved free cash flow visibility over the next six months combined with an attractive and safe dividend yield suggest that price momentum may continue, driving the stock to new highs.

We now expect some earnings growth even for 2008, but the main investment thesis for FTE is P/E multiple expansion which is now dramatically taking place. We believe investors aggressively de-rated FTE’s P/E multiple in 2006-2007 due to limited cash flow visibility, but we view those fears as overdone and expect the stock to make new highs going forward.

France Telecom is trading at 12.5x our revised 2008 earnings per ADR estimate, which is a discount to the average telecom operator. We believe the discount should narrow, given France Telecom’s dominant position in the French telecom market (both fixed and wireless), and the potential for dividend increases although to a lesser extent now. We expect the stock to get back to its positive momentum, largely due to the impact of cost cutting and rapidly improving results internationally and in France.

We revise down our target to $40.00 to reflect rising market risk premiums. When looking at its closest peers, Deutsche Telekom (DT - Analyst Report) and Telefonica S.A. (TEF - Analyst Report), FTE still undervalued. We do not think this valuation gap is sustainable although it has recently narrowed due to the good performance to date of Deutsche Telekom. We believe FTE can still rally up to year end where we will get the final clue towards revenue and cash flow growth.

Read the full analyst report on FTE


Read the full analyst report on DT


Read the full analyst report on TEF


Email

Print

Share

RSS

Rate Pos

Rate Neg

Comment
Free Stock Analysis From Zacks
  Includes Zacks Long-Term Recommendation and Target Price
Read/Post Comments (0) | Recommended this article (1)
 Posting Comment...
There was a problem posting this this comment. Please try back later.
[CLICK TO CLOSE X]
Comments (Limit 1000 Characters - Used: 0)
Display Name: Email Address:  
 Loading Comments...
Be the first to comment on this article!
Best Stocks. Best Insight. Join Now...it's FREE!
Over 550,000 investors look forward to the timely insights in our email newsletter; Zacks Profit from the Pros. In each daily issue you will find:
  • Free  Four Zacks #1 Rank "Strong Buy" Stocks
  • Free  Timely Market Commentary
  • Free  Wealth Management Tips
  • Free  Profitable Strategy Screens
  • Free  Bull and Bear Stocks of the Day
Zacks FREE Registration

More Zacks Resources

Market Summary Feb 10, 2010 00:47 am ET
DJIA 10058.64  150.25 1.52%
NASD 2150.87  0.00 0.00%
S&P 500 1070.52  13.78 1.30%