Rogers: Analysts Haven't Given Up Yet

| About: Rogers Communications (RCI)

By David Berman

Investors punished Rogers Communications Inc. (NYSE:RCI) when the cable and wireless company reported its second quarter results earlier this week. The shares fell 1.5% on Tuesday and were down another 3% in late-morning trading on Wednesday, based largely on concerns about rising competition in the increasingly crowded wireless business.

Tell that to analysts. A number of them – including Credit Suisse, CIBC, Canaccord Genuity, TD Newcrest and Bank of Montreal – have raised their target prices on the stock, generally by $1.

Vince Valentini at TD noted that Rogers’ second quarter results were well above both his estimates and those of his peers, which should lead to upward revisions to 2010 and 2011 estimates. He also expects the company will boost its dividend in February, 2011, which should make the stock even more attractive to yield-loving investors.

“Once we get over the initial hump of uncertainty related to new wireless competition, we believe that more portfolio managers will be attracted to the following attributes of [Rogers] shares: a) strong balance sheet; b) minimal exposure to the unpredictable pace of global economic recovery; c) rising dividends and a 3.5% yield; d) earnings per share growth expectations of 14%; and e) price-to-earnings multiple of only 12-times 2010 estimates,” he said in a note.

Hey, did he mention uncertainty? Maher Yaghi at Desjardins Securities said the same thing, but he believes it poses a near-term risk for the stock, which he downgraded to a “hold” recommendation from a “buy” (but also raised his estimate to $39.50 from $38.40).

“Overall, our long-term thesis on Rogers remains unchanged–Rogers remains ‘the’ play on wireless, which should continue to be the engine of growth for the telecom sector in Canada,” he said in a note.

“We believe that forces outside the company’s control (i.e., potentially irrational pricing from new entrants, new iPhone upgrade cycle, more aggressive marketing push by competitors during back-to-school) could undermine investor sentiment in the second half of 2010. We would look to upgrade the stock should these headline risks pass without affecting the company’s profitability.”