Zacks senior telecom industry analyst David Weissman, CFA has recently issued a Hold recommendation to Japanese wireless service provider NTT DoCoMo, Inc. (DCM). Here's what his latest update had to say:
'We maintain our Hold recommendation for NTT DoCoMo, the largest wireless service provider in Japan, following mixed financial results of second quarter (ended September) fiscal 2008. In spite of commanding a 53% share of the total Japanese cellular market, the company faces intense pricing pressure from competitors due to various regulatory mandates in Japan. This continues to impact DCM's customer retention, top-line sales level and profit margins. DCM also consolidated its eight regional sales divisions to streamline operating costs, and is seeking expansion opportunities outside Japan.
'DCM is currently trading at 15.5x P/E to our fiscal 2008 earning estimates. This is at a premium to the peer group (other Asian carriers) but near par with the S&P 500 average. However, with respect to other selected valuation metrics, the stock is trading well below its peers. We believe this discount is warranted as the company is gradually losing market share to competitors, including KDDI Corp and Softbank. Financial guidance provided by management for fiscal 2008 is also tepid.
'However, according to our analysis, DCM maintains technical superiority with large-scale global deployments of W-CDMA technology, facilitating the company to offer compatible international advanced roaming capabilities to its subscribers. Successful implementation of its interoperable LTE network provides a service differentiation over competing carriers. We remain positive regarding the commercial success of FOMA 904i and FOMA 704i mobile handsets. We maintain our six-month target price of $16 based on a forward price/sales multiple of 1.74x our fiscal 2008 sales estimate.'
Read the full analyst report on DCM.
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