On Friday, UBS analyst Polo Tang adjusted the rating for Deutsche Telekom (ETR:DTEGn) (DTE:GR) (OTC: OTC:DTEGY), shifting from Neutral to Buy and enhancing the price target to €33.00, up from the previous €31.00. This change comes after Deutsche Telekom's shares experienced a 6% decline in the wake of a 14% drop in T-Mobile US (NASDAQ:TMUS) stock value.
Tang cited the recent market movements and a perception of cautious sentiment regarding the fourth quarter, adjustments to the consensus on 2025 free cash flow, and profit-taking following a strong performance as reasons for the downgrade.
Tang believes the downturn in Deutsche Telekom's stock offers investors an opportune moment to invest in a company with significant exposure to the U.S. market, which contributes over two-thirds of its EBITDA. He also notes that Deutsche Telekom is poised for a defensive annual earnings per share growth rate of over 11%, which is unlikely to be heavily affected by the competitive pricing seen in various European markets.
The upgrade to a Buy rating and the increase in the price target to €33 are attributed to currency exchange factors. Tang also points to potential catalysts for additional growth, including a stronger U.S. dollar, further clarity on T-Mobile US's outlook for 2025, possible changes to U.S. tax laws, announced mergers and acquisitions in the U.S. (with debt already accounted for in estimates but not operational benefits), and potential further buybacks at Deutsche Telekom's level.
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