UBS upgrades BT to 'neutral' but remains cautious

10th Apr 2014 09:13

UBS has upgraded its rating for telecoms giant BT from 'sell' to 'neutral', saying that the stock's current valuation is no longer expensive.However, while the shares are down from their record highs reached in February, the bank said it remains "relatively pessimistic" on the investment case."BT avoids many of the sector's risks but has its own. In our view consensus remains too optimistic over the ease of a wholesale deal on sports with Sky, the ability of BT to recoup Sports and the impact of mobile spending on cash flow," said UBS analysts Nick Lyall and Michael Hill.Nevertheless, they said that the upcoming fourth-quarter results from the company "should be solid" with underlying revenue down just 0.9% and operating profits flat. The analysts said that they are now loess concerned by fibre regulation and the pension deficit."After a 14% fall from February highs we believe shares now fairly reflect risks and upgrade to 'neutral'. We make few changes to forecasts, shares no longer look expensive to us on a price-to-earnings ratio 12.8, cash yield of 7.2% and dividend yield of 3.4%."The bank raised its target price for the stock from 350p to 360p.The shares were up 1.1% a 367.59p by 09:40 on Thursday.BC