2023-11-09 22:43:20
(Photo: LesAffaires.com)
What to do with BCE, Nuvei and CGI Group securities? Here are some analyst recommendations likely to move prices soon. Note: the author may have an opinion completely different from that expressed.
BCE (BCE, $53.35): reduction of investments by a billion dollars
The CRTC announced on November 6 that it would allow independent competitors to sell their Internet services on the fiber optic networks of BCE and Telus in Ontario and Quebec.
BCE reacted to this decision by announcing a reduction in its investments of one billion dollars (G$) for 2024 and 2025.
The telecommunications company also announced that it would reassess the expansion of its Fiber to the Home (FTTH) network and reduced its connection targets for 2025 from 9 million to 8.3 million.
CIBC Capital Markets analyst Stéphanie Price believes that the company will focus on urban areas and projects to renew existing infrastructure and will in return abandon rural and remote areas.
For Drew McReynolds of RBC Capital Markets, this reduction in capital investment expenditures is a logical decision on the part of BCE following a CRTC decision “that is difficult to explain.”
“We understand that the CRTC is trying to create a swing back and wants to increase competition in Canada by creating a greater wholesale environment for Internet and mobile phone services. However, arbitrarily applying an interim regulatory framework for Ontario and Quebec and not for other regions simply leaves us perplexed,” notes Drew McReynolds.
Stéphanie Price does not expect the new regulations to have the desired effect. “While we do not expect a significant change in the competitive landscape as a result of the new wholesale rates, tighter regulation poses a hurdle for the sector. BCE has invested billions of dollars in its fiber optic infrastructure network and we expect the company to appeal the decision,” she said.
Temporary access rates range from $65 to $78, depending on speed levels, which represents a 30% profit margin for BCE and TELUS, but excludes additional service fees that resellers will have to pay.
Although she considers the CRTC decision negative for BCE, Stéphanie Price believes that the reduction in expenses will ease investors’ concerns regarding the dividend payout ratio. She continues to consider BCE a well-managed company and maintains her “neutral” recommendation and her one-year target price of $55.
Drew McReynolds, expects the decline in investments to result in an increase in free cash flow from $3.8 billion to $4.3 billion for fiscal 2024 and from $4.2 billion to $4.6 billion for 2025. It maintains its assessment at “performance equal to the sector” and its one-year target price of $59.
Matthew Hains
Nuvei (NVEI, US$18.85, $25.91): results that please analysts
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