Berenberg ups TalkTalk to 'hold', says share price reflects challenges

3rd Aug 2015 11:49

(ShareCast News) - Berenberg upgraded TalkTalk to 'hold' from 'sell' with an unchanged price target to 290p."With the share price back to where we initiated with a sell, TalkTalk has underperformed the sector by 21%," it said, adding that the stock price now reflects the company's challenges.Berenberg said that each quarter it seems to go through an exercise of downgrading estimates and this quarter is no different.Only 3.5% first-quarter revenue growth is disappointing ahead of a competitive second quarter, while comments about the second half versus first-half core earnings phasing being more pronounced than in previous years suggest a cut to full-year estimates, the bank said.It reckons TalkTalk has set itself unreasonable guidance objectives for full-year 2017, with a 5% annual revenue CAGR targeted and a 25% margin versus the 13.6% delivered in full-year 2015.Against Bloomberg consensus, Berenberg remains 7%/14%/14% below EBITDA estimates for FY16/FY17/FY18, respectively.Still, there are some positives, said Berenberg, noting that price inflation seems to be more buoyant than ever, and the revenue growth targets look realistic.At 1059 BST, TalkTalk shares were up 0.3% at 302.20p.