Valuation gap in BT Group has closed materially, Credit Suisse says

20th Feb 2014 12:22

BT is set to continue benefiting from several favourable long-term trends, but the gap between consensus expectations for operating profits (in terms of earnings before interest, taxes, depreciation and amortisation) and those of analysts at Credit Suisse has "closed materially" after the shares' more than 80 per cent rise since November 2012. The main reason for the above is that the near-term potential for further cost cuts is now more fully reflected in the shares, although the company is believed to be able to continue to cut costs for the next six years no less. Hence the Swiss broker's decision on Thursday to remove the stock from its 'Focus list', albeit while at the same time hiking its price target to 440p from 350p previously.As regards the other top line trends which must continue to improve are the transition of its users towards fibre from DSL and the slowdown in the rate of line losses.To take into account as well, Credit Suisse reminds clients that in the second half of this year BT will face a costly Premier League rights auction, which entails some 'content risk'. The firm may find itself under pressure to bid substantially more than in the summer of 2012.AB