Mixed broker views on TalkTalk

3rd Feb 2016 09:47

(ShareCast News) - Exane BNP Paribas has upgraded TalkTalk from 'neutral' to 'outperform' on the company's weak share price, however Goldman Sachs downgraded the company from 'buy' to 'neutral'.The FTSE 250 telecoms provider's value plunged late in 2015 after a serious cyber-attack saw the company suspend sales to new customers for a short time and see significant damage to its brand value.It said yesterday that the cyber-attack had a trading impact of £15m, and created exceptional costs of £40m-£45m, as well as estimating that 95,000 customers left due to the attack.Exane BNP Paribas on Wednesday said the spin and lack of confidence in guidance made the investment bank cautious initially."However, with the stock below 250p it offers a far more compelling risk/reward."The bank said while the hack had an impact on third quarter results, the fourth quarter is looking to have stabilised."Our proprietary survey of 500 UK consumers shows that TalkTalk customers value price over anything else."They believe that TalkTalk offers by far the cheapest price with a quality of service that is comparable to the big brands."While Exane BNP Paribas cut its short term forecasts, they have been compensated by a more positive view in the medium term."We conclude that while TalkTalk remains an opaque situation (more so since the cyber-attack) the risk reward in the shares is compelling."It increased its target price from 260p to 315p.However not everyone was as optimistic, with Goldman Sachs downgrading the company and removing it from its Pan-Europe Buy List.It said it believed there is an increased structural uncertainty on TalkTalk's ability to grow long-term earnings, only partly due to the recent cyber-attack."We continue to forecast top-line growth compounding efficiency gains, but our less positive view on price rises in UK triple-play and Talk's potentially weaker price position lead to lower long-term revenue growth forecasts (1%-3% from 2%-4% 2016-20E)."Goldman Sachs said the company's valuation is less compelling on its lower estimates, and it dropped its price target from 312p to 271p.Shares in TalkTalk had rebounded somewhat from Tuesday's losses, up 4.2p (1.89%) to 226.2p at 1108 GMT.