Goldman excited by mobile launch at BT

28th May 2014 10:59

BT Group was benefiting from an upbeat outlook at Goldman Sachs on Wednesday, which said that the stock offers higher growth and a cheaper valuation than others in the sector.Goldman maintained a 'buy' recommendation and 520p target price for the shares, which represents 33% potential upside from Tuesday's closing price of 392p."We argue that BT is trading on 10-year low multiples while offering 10-year high growth opportunities," the bank said, adding that mobile is the key to boost growth at the telecoms firm.BT's consumer mobile operations, which should launch at the end of the summer, will be a positive catalyst for the stock, Goldman said. It estimates that mobile could lift revenue growth by around two percentage points from 2015 and raise group free cash flow by 7% by 2017.The bank explained: "BT will roam on EE's network but also offload mobile traffic onto its fixed network via wi-fi, giving it a material cost advantage in our view. "All usage in the home will be offloaded, as Telenet currently does in Belgium, but we believe BT will also use cutting-edge technology to offload data usage outside the home. We see material scope for earnings momentum following BT's mobile launch."Goldman also said that several key investor concerns - content price inflation, fibre network competition from TalkTalk and BSkyB, and pension cost risks - are being "overplayed" by the market."We believe that they do not merit the material valuation discount the stock is trading on versus its history and versus the sector."The shares were up 1.2% at 396.7p by 11:14.BC