JPMorgan says BT entering next phase of re-rating, altnet threat receding

(Sharecast News) - BT Group was the standout gainer on the FTSE 100 on Friday on the back bullish notes by JPMorgan and Goldman Sachs.

JPM lifted its price target on BT to 310p from 300p and maintained its 'overweight' rating, saying its analysis suggests we are past peak pain on altnet competition and that Openreach's line loss should now steadily improve.

The bank noted that despite having doubled off its 2024 lows, BT remains the most heavily debated Telco in Europe.

"Pushbacks centre around the perceived threat from altnets, the credibility of an as-yet unproven EFCF inflection, the headwind of persistent consensus downgrades, and a still sizeable pension deficit," it said.

JPM said that critically, it expects the coming months to ease many of these concerns, which should confound the critics and fuel the next leg of BT's re-rating. It said that following six years of rangebound cash generation, Mar-27 should deliver 30% growth, lending credibility to management's ambition of doubling EFCF by March 2030.

"This would see BT's dividend covered for the first time in a decade," JPM noted.

"Against this backdrop, we reiterate our hope that BT might unveil a new dividend policy, linked to its EFCF growth outlook.

"We show that doubling the dividend by Mar-30E would deliver an 8% yield, yet leave ample room for deleveraging."

JPM said this would demonstrate BT's confidence in its outlook and help close the duration gap. It added that BT still screens very cheap.

Separately, Goldman - which has a 'buy' rating on BT and has the stock on its 'conviction list' - said full-year results are a key potential positive catalyst and there is scope to double the dividend.

The bank's buy thesis is predicated on fibre infrastructure monetisation in wholesale broadband (Openreach) driving above consensus, ramping free cash flow.

At 1430 BST, BT shares were up 4.9% at 232.50p.

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