Shares in BT Group (LON:BT.A) have gained ground in London in today’s session, outperforming the broader London market, as Morgan Stanley turned bullish on the stock, noting that the telco has underperformed the FTSE 100 index in the past year. The comments come after Barclays noted yesterday that the former telecoms monopoly was undervalued.
As of 14:18 GMT, BT’s share price had added 2.91 percent to 399.00p, outperforming the benchmark FTSE 100 index which has climbed marginally higher and is currently 0.30 percent better off at 7,297.51 points. The group’s shares have lost just under 14 percent of their value over the past year, as compared with about a 24-percent rise in the Footsie.
Morgan Stanley lifted its stance on BT from ‘equal weight’ to ‘overweight’ today and hiked its price target on the shares from 450p to 490p, noting that the stock had underperformed the FTSE 100 in the last 12 months, providing a good entry opportunity. Sharecast quoted the analysts as pointing to three reasons why they expect a better share price performance this year, namely better operational news flow ahead, gilt yields coming off their lows – which they argue is good for pensions – and a compelling valuation.
The bank further noted that its AlphaWise survey pointed to further strong quarters ahead for the former telecoms monopoly with market share wins in broadband and TV and rising average revenue per user. Morgan Stanley also said that full legal separation of the telco’s network division Openreach was unlikely to play out given the higher pension costs it could trigger.
Morgan Stanley’s rating upgrade comes hot on the heels of Barclays’ comments that BT Group has underperformed the sector ‘materially’ las year. The UK bank, however, cautioned that regulation remained ‘an overhang’ with the company involved in a stand-off with watchdog Ofcom over Openreach.