Another Buy recommendation has been granted to France Telecom (FTE) by Zacks senior European markets analyst Santiago Burgaleta, CFA, even as the telecommunications giant reaches new highs. Here's why:
'We remain buyers of France Telecom ADRs. Improved free cash flow visibility over the next six months, combined with an attractive and safe dividend yield, suggest that price momentum may continue driving the stock to new highs. Our new target price is $42.50.
'We now expect some earnings growth for 2007, but the main investment thesis for FTE is P/E multiple expansion which is now dramatically taking place. We believe investors aggressively de-rated FTE's P/E multiple in 2005-2006 due to limited cash flow visibility, but we view those fears as overdone and expect the stock to make new highs going forward.
'When looking at its closest peers, Deutsche Telekom (DT) and Telefonica S.A. (TEF), FTE is still undervalued. We do not think this valuation gap is sustainable although it has recently narrowed due to the good performance to date of DT. We believe FTE can still rally up in the year-end, where we will get the final clue towards revenue and cash flow growth.'
Read the full analyst report on FTE.
Read the full analyst report on DT.
Read the full analyst report on TEF.
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