Market Report: BT investors run for cover after Deutsche Bank’s gloomy outlook

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Dark clouds are gathering over the masts of BT, creating a perfect storm for Gavin Patterson’s group this year.

That’s the verdict of number-crunchers at Deutsche Bank, who cut their target price to 410p for the group, which provides phone, broadband, TV, and now mobile services after its £12.5 billion takeover of EE.

The analysts already had a Sell rating, but are now even gloomier on BT’s outlook for this year. Shares fell 6.1p to 489.9p today.

Among the “multiple headwinds conspiring” are Virgin Media’s speedy roll-out of its cable network, Sky’s impending entry into mobile, TalkTalk’s ramp-up of mobile, and Vodafone’s fixed-line broadband.

Worse still, Ofcom is pushing for BT to improve its Openreach service. The only glimmer of hope for BT is EE, but even that could take a hit if O2’s tie-up with rival operator Three gets the green light, according to Deutsche.

The FTSE 100’s steady gains continued as the top hundred stocks rose 20.45 to 6173.33.

Pearson was among the fallers, down 16p at 854.5p as Goldman Sachs downgraded the education publisher to Sell. The heavyweight broker called the former FT owner’s £800 million operating profit target for 2018 “unrealistic”.

Intertek, the products-testing group, was the biggest casualty on the blue-chip table, tumbling 117p to 2887p — a 4% fall triggered by the oil and gas industry’s woes, which forced it to write down the value of acquisitions by £577 million.

Solid annual results from Costain convinced investors that the engineering solutions group was on steady ground.

The shares were 12p firmer at 370p after revenues increased from £1.1 billion to £1.3 billion and pre-tax profits climbed to £26 million.

Amec Foster Wheeler, 18.9p better off at 408.1p, inspired confidence as it successfully refinanced its debt despite a turbulent time for oilfield services firms, with banks queuing up to replace its existing facility.

On the junior market, Telit Communications slumped 23.8p, or more than 10%, to 209.2p as Berenberg — the Israeli wireless technology firm’s house broker — cut its rating to Hold ahead of next week’s annual results, citing “order book uncertainty” in the US.

Churchill Mining was 1.1p down at 15.9p as it revealed it was eyeing funding options to deal with higher costs related to a long-running dispute in Indonesia over the ownership of vast coal reserves. 

Shareholders feared a severely discounted equity raise.

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March 3, 2016 |
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