On Monday, Goldman Sachs (NYSE:GS) began coverage on Sunrise Communications (SUNN:SW) with a Sell rating and a price target of CHF41.00. The firm highlighted that while Sunrise, a Swiss telecommunications operator that was recently spun out of Liberty Global (NASDAQ:LBTYA), provides a high dividend yield that is well-covered, the market in Switzerland presents low-growth opportunities. Additionally, the firm pointed out that Sunrise is burdened by significant costs that could hinder the growth of its long-term return on invested capital (ROIC).
Sunrise Communications operates in a challenging environment according to Goldman Sachs, which sees limited potential for the company's valuation to become more attractive. The analyst noted that the Swiss telecom market's growth prospects are limited and that Sunrise's current cost issues could dampen future financial performance.
The assessment by Goldman Sachs also touched upon the lack of potential for mobile market consolidation in Switzerland, which is often a catalyst for telecom companies to improve market position and financial metrics. The absence of this consolidation possibility was cited as a factor in the decision to initiate coverage with a Sell rating.
Sunrise Communications' valuation was deemed "uncompelling" by the analyst, which suggests that the firm believes the stock is not priced attractively relative to its earnings prospects and market conditions. This valuation perspective is a key factor in the recommendation provided by Goldman Sachs.
The price target of CHF41.00 set by Goldman Sachs for Sunrise Communications represents the firm's expectation of where the stock price could move over the next 12 months. The coverage initiation and the associated price target reflect the firm's analysis of Sunrise Communications' financial outlook and market position.
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