Barclays cuts BT Group rating amid European telecom stocks reshuffle

Investing.com -- Barclays (LON:BARC ) analysts on Tuesday made adjustments to its ratings on several European telecom stocks, including BT Group (LON:BT ), Telecom Italia (BIT:TLIT ), and KPN (AS:KPN ).

Specifically, the investment bank cut its rating on BT shares to Equal Weight from Overweight with a new price target of 190 pence, reduced from 215 pence.

“We believe that BT will face increasing revenue headwinds in the next 12 months, with extended pressure from AltNets,” analysts led by Mathieu Robilliard said in a note.

“Much of this is not new, but we believe Openreach broadband line loss will likely remain firmly negative in FY26e, and do not believe that BT will grow revenues in the FY26e year, unlike most EU incumbents,” they added.

BT shares fell 1.5% in London trading. 

In contrast, Telecom Italia saw its ordinary shares upgraded to Overweight from Equal Weight, with a price target set at €0.32.

Barclays highlighted TIM's reduced financial risk, positive free cash flow, and potential for revenue and EBITDA growth driven by the business-to-business sector and cost-cutting measures.

Deutsche Telecom (BCBA:TECO2m ) (DTE) remains the “core Overweight” name, Barclays notes, voicing confidence in the company's growth prospects, particularly in the United States and Germany.

“With strong US growth, steady German trends and also healthy trends in other European countries we see DTE’ group continuing to deliver best in class growth among the large caps, which will enable growing cash return,” analysts emphasized.

They also expect DTE’s return on capital employed (ROCE) to exceed the weighted average cost of capital by the end of 2024 and further growth in 2025.

Meanwhile, Dutch telecom company KPN was downgraded to Equal Weight from Overweight, maintaining its price target at €4.2.

While the outlook for KPN remains largely unchanged for 2025 compared to 2024, Barclays sees limited potential for rating upgrades and no merger and acquisition upside, suggesting that there may be more attractive investment opportunities elsewhere in the sector.

From a broader perspective, Barclays believes that investing in high-quality and momentum is usually the “best route” for EU telecom stocks. While analysts think this theme will continue in 2025, they believe that “potential consolidation means exposure to "recovery" names also makes sense.”

Source: Investing.com