2023-12-20 00:24:59
Rogers is undervalued relative to its peers according to Stephanie Price of CIBC Capital Markets. (Photo 123RF)
What to do with the titles of Rogers, Apple and Imperial? Here are some analyst recommendations likely to move prices soon. Note: the author may have a completely different opinion than that expressed by the analysts.
Rogers (RCI.B, $60.69): the discount should not last long
Rogers has the wind in its sails as 2024 approaches, according to Stephanie Price of CIBC Capital Markets, so much so that it is increasing its target price from $69 to $79.
In an increasingly competitive wireless market, the Canadian telecommunications giant is managing to carve out an increasingly important place for itself. In the third quarter, recalls the analyst, its number of net new subscribers increased by 39% compared to the same period last year.
CIBC Capital Markets is banking on a slowdown in growth in average revenue per consumer next year, as well as in the number of new subscribers. Rogers should nevertheless do well, since it particularly targets new Canadians and immigrants.
It should also benefit from the synergies created thanks to the integration of Shaw. Already, in 2023, it has saved $360 million, while Rogers was counting on $200 million at the start of the year. According to Stephanie Price, this is the result of a cleaner organizational structure, while the company has divested itself of duplication in its cable service and its head offices in particular.
The analyst doesn’t expect the company to save more than $1 billion, but the speed at which the integration is happening might still increase those numbers. It should also benefit from an increase in cross-selling thanks to the synergy created with Shaw.
Certainly, since its acquisition, Rogers is the most indebted telecommunications company, recognizes Stephanie Price. However, its leverage should increase from a multiple of 5.3x to 4.7x by the end of 2023, following the “sale of its stake in Cogeco”, she raises. The company might reduce it even further by divesting itself of certain assets, such as buildings.
The company also spent less than expected in the latest 3.8GHz spectrum auction, paying $475M rather than $1B as expected, the analyst reports. It should pay this amount during the first half of the year. In the second quarter of 2024, the company’s leverage is expected to reach a multiple of 4.5x.
In his opinion, Rogers is undervalued compared to its peers, with its stock trading at a discount to its historical value. This gap should not last much longer, however, believes Stephanie Price.
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