At actions gives Telefonica Brazil advanced this Thursday, among the positive highlights of the Ibovespaendorsed by a report by the Credit Suisse raising the share recommendation to ‘outperform’.
“In light of an unfavorable macro outlook and low expectations for equities, we believe that equities telecommunications are attractive investments in 2023″, said analysts Daniel Federle and Victor Ricciuti.
Telefônica Brasil, which operates under the brand Aliveand the TIMwhich remained ‘outperform’ rated and remains their industry favorite, have a defensive profile and are at discounted valuations, they add.
Around 11:15 am, Telefônica Brasil shares advanced 1.78%, at 37.09 reais each, while the Ibovespa showed an increase of 0.75%. At the same time, TIM’s shares fell 0.5%, at 11.84 reais.
They calculate that both revenues should see moderate growth this year, given the bad macro scenario, but forecast a robust cash flow expansion of around 30% year-over-year in 2023.
“In 2023, we expect a reduction in below-the-line promotions, lower churn (cancellation) and some level of price increases in stores,” they wrote in the report dated the day before.
“In talking to companies, we sense that there is a desire to increase headline prices more broadly, which is not included in our estimates and would be a positive catalyst,” they said.
In Federle and Ricciuti’s view, a more prominent increase in core prices would boost revenues and margins and renew the view that telcos can sustainably increase revenues above inflation.
“The big question is whether the macro conditions will allow it.”
Still, analysts cut price targets for the two companies’ shares, citing slightly lower growth and rising cost of equity (Ke). In the case of Telefônica Brasil, it went from 52 reais to 46 reais. TIM had a reduction from 16.50 to 15.50 reais.
Revenue, Ebitda (earnings before interest, taxes, depreciation and amortization) and net income estimates for Telefônica Brasil and TIM in 2023 also slightly decreased due to a more challenging macroeconomic scenario.
“In practical terms, we assume in our base scenario timid price increases, higher cost inflation and high financial expenses throughout the year – stable Selic rate and 6% inflation in 2023”, they said.
Source: Moneytimes
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