Deutsche Bank Upgrades Telefonica (TEF) to Buy; Attractive Valuation

September 14, 2009 7:16 AM EDT

Deutsche Bank upgrades Telefonica (NYSE: TEF) to Buy. Price target €19.2

Deutsche analyst says, "New analysis suggests Spain could be one of the first European markets to recover mobile usage, and TEF's DSL share is improving following necessary price cuts. We believe TEF is attractively geared into increasing risk appetite as the market rallies, and we anticipate a market-beating dividend at its October investor day."

"We roll forward our valuation to YE2010E, raising sum-of-parts derived target price from €18.2 to €19.2 per share. We make small net income revisions for 2009E/10E, +0.2%/2.1%, respectively, with the latter driven by new associate China Unicom. More importantly we upgrade 2009E dividend from €1.15 to €1.25 ahead of the 9th October investor day (consensus €1.15 per share). Relative valuation is attractive, in our opinion: 2010E PE 8.8x vs. sector 10.2, DBe dividend yield 8% vs. sector 7.1%."

To see more analyst ratings on TEF Click Here.

Telefonica, S.A., a telecommunications company, focuses on providing fixed and mobile telephony services in Spain and internationally.

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