On Thursday, Bernstein SocGen Group updated its outlook on Deutsche Telekom (ETR:DTEGn) (DTE:GR) (OTC: OTC:DTEGY), increasing the price target from EUR32.00 to EUR38.00 and reaffirming an Outperform rating. The adjustment reflects the firm's confidence in the telecom giant's growth prospects, particularly in the United States, which is a significant contributor to the company's cash flow.
The research firm's analysts highlighted Deutsche Telekom's robust growth outlook, distinguishing it from its European peers. The company's consistent performance in meeting and surpassing targets has lessened market skepticism, with many now viewing the stock positively. Despite this, the analysts noted that Deutsche Telekom's stock re-rating has lagged behind the Street's upgraded estimates, suggesting that valuations remain attractive with potential upside.
Deutsche Telekom's growth trajectory in the U.S. is expected to remain solid, bolstered by its 5G leadership and strong pricing power. In addition, two new growth drivers are identified: an increase in ARPA (average revenue per account) as T-Mobile US (NASDAQ:TMUS)'s lines-per-account ratio is approximately 10% below that of its peers, and a rise in ARPU (average revenue per user), supported by recent pricing strategies from competitors Verizon (NYSE:VZ) and AT&T (NYSE:T), which provide T-Mobile US with the flexibility to raise postpaid prices while maintaining its value proposition.
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