Uncertainty Surrounds Outlook for Rogers Communications

Feb. 2.10 | About: Rogers Communications (RCI)

By David Berman

Still wondering how Rogers Communications Inc. (NYSE:RCI) will fare in the wake of rising wireless competition in Canada? Goldman Sachs isn’t. According to Bloomberg News, analyst Jason Armstrong put the stock on his “conviction sell” list – suggesting that he’s more certain about the telecom stock’s fate since giving the stock a “sell/neutral” recommendation in October.

“Accelerating wireless competition and expectations for slowing growth produce an expensive valuation” for Rogers’ shares compared with other global telecommunications stocks, Armstrong said, Bloomberg reported. Sorry, no price target yet.

Rogers shares were down in afternoon trading on Tuesday, reflecting the heft of Goldman Sachs’ views. The stock has just two “sell” recommendations from analysts, compared to 15 “buy” recommendations. However, it is interesting to see how polarized some analysts are on this stock, given the firm convictions of some recommendations.

Just as Goldman Sachs is convinced Rogers shares are doomed to decline, other analysts are just as sure that the fears surrounding the stock are overblown. For example, TD Newcrest has an “action list buy” on the stock and a 12-month price target of $40, implying a 20% upside from Tuesday’s price. (Put another way, if Goldman Sachs is saying you’re a fool to buy the stock, TD Newcrest is saying you’re a fool not to buy it).

RBC Dominion Securities also has a $40 price target, although their colourless “buy” recommendation does not sound like a fist pounding the table. In their view, the current share price reflects a price war scenario among wireless competitors, which means that the worst-case scenario is likely already built in to the share price.

“While it is impossible to predict the actual outcome years from now, we nevertheless believe the current valuation offers upside to RCI shares if competition proves less of a disruption,” said Jonathan Allen, the RBC analyst, in a note in late January.