Saturday, April 21, 2007

Merrill: Telus Shares Should Level Off Soon

Following the recent run-up for Telus Corp. shares, the stock could price could level off until Industry Canada sets its spectrum auction policy in the fall. Merrill Lynch analyst Glen Campbell, who lowered his rating on Telus to “neutral” as a results, also noted that a potential buyout offer is unlikely before this pivotal decision.

He did raise his fair value estimate for Telus shares by C$1 to C$62 for 2007, while he is at C$65 for 2008.

However, this valuation does not reflect upside that could come from a buyout, which he previously estimated in the mid-$60 range.

“In the current climate, however, a bid of up to C$70 cannot be ruled out,” Mr. Campbell said in a research note.

He also noted increased price competition in the wireless market as competitors appear to be trying to boost market share. While Rogers does not appear to be making major changes, Mr. Campbell says Telus has with its promotions boost for the second quarter.

Telus reports first quarter results on May 2, when he expects earnings before interest, taxes, depreciation and amortization of C$925 million and revenue of C$2,197 million, which are generally in line with consensus.

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