BT discount to peers unwarranted, says Goldman

BT's discount to peers is "increasingly unwarranted", Goldman Sachs said on Tuesday as it lifted the stock to 'buy' from 'neutral' and upped the price target to 320p from 240p, noting implied upside of 24.7%.

GS argued that BT's 10% discount to sector peers is unjustified as the group starts to deliver earnings momentum with improving regulatory clarity.

The bank said its price target hike reflects growing confidence in BT's long-term growth outlook and its higher margin estimates.

"BT's cost transformation (FY19-21E) is already paying dividends, and the bottom-up nature of the plan should minimise future execution risk ahead of a new CEO in 2019, alongside the longer-term opportunity for digital cost-cutting," said Goldman.

"We believe this will drive a stabilisation in return on invested capital despite regulatory headwinds, with returns looking relatively attractive versus sector peers."

Goldman added that its forecasts are now ahead of consensus for the first time in two years.

At 1000 GMT, the shares were up 1.7% to 260.87p.