BT boosted by Morgan Stanley upgrade

11th Jan 2017 09:45

(ShareCast News) - BT Group got a lift on Wednesday as Morgan Stanley upgraded its stance on the stock to 'overweight' from 'equalweight' and bumped up the price target to 490p from 450p.It noted the shares have underperformed the FTSE 100 by a disappointing 41 percentage points in the last 12 months, providing a good entry opportunity.The bank pointed to three reasons why it expects a better share price performance this year: better operational news flow ahead, gilt yields coming off their lows - which is good for pensions - and a compelling valuation.MS said its AlphaWise survey indicates further strong quarters ahead for BT with market share wins in broadband and TV and rising average revenue per user. In addition, it sees further success in BT Mobile, driven by the recent push into family SIMs and the Enterprise market.It also said that full legal separation of Openreach is unlikely to play out given the higher pension costs it could trigger.As far as yields are concerned, it noted AA UK corporate bond yields have bounced from a low of less than 2% in early September to 2.7% currently, which is positive for BT's pension due to a lower present value of liabilities.On valuation, it highlighted the fact that BT is trading at a 16% discount to the median UK stock from almost parity in late 2015/early 2016.At 0950 GMT, the shares were up 2.6% to 397.90p.