August 18, 2022

Telekom Austria with good value and broad buy recommendations

Telekom Austria with good value and broad buy recommendations

In uncertain times, people like to go back to the tried and true. For this reason, we select the Austrian telecom provider from the Austrian stock index ATX Top 10 List. Telekom Austria is engaged as full service telecommunications providers of long distance, local and wireless services and corporate data communications services. The Company operates in Austria, Bulgaria, Croatia, Belarus, Slovenia, the Republic of Macedonia and the Republic of Serbia.

PRO: The following three points speak for a buy:

  1. Telekom Austria is in a safe country with a cheap valuation in respect to it’s size. It’s cheaper than 80% of comparable companies (an Obermatt Combined Rank of 80) and pays higher dividends than 70% other likewise investments (Dividend Yield Rank of 70).
  2. While maintaining its position in the market (Sales Rank of 50), it has grown profits over proportionally (Profit Rank of 80).
  3. There is no bad news as far as we know today and many banks recommend buying the stock, including Austrian Raiffeisen Banken while credit risk is rated stable by Moody’s, also reflected in the Safety Rank of 73.

CONTRA: The following three points argue against it:

  1. The operations in Belarus are at risk due to the Russian invasion of Ukraine.
  2. Telecommunications is a highly competitive industry where incumbents sometimes have legacy costs that put them at a disadvantage. Being present in emerging European markets, the Telekom Austria brand may help.
  3. JP Morgan recently lowered the price target, but still speaks of a significantly higher expected price than paid today.

The PRO points clearly outweigh the cons. For this reason, Telekom Austria is a definitive buy at this point in time.

We decided against OMV.

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