Maurice Patrick has around 20 years of experience in the telecom sector – and he is very bullish on two UK-based telecom companies, Gamma Communications (GB:GAMA) and BT Group (GB:BT.A).
These companies had their share of revenue loss during the pandemic but are back on track – and Patrick believes in their long-term prospects.
Patrick is the managing director at Barclays Capital and covers the European telecom companies.
Prior to this, he worked as a telecom analyst at J.P. Morgan and Bear Stearns. He has also worked with BT Group in various roles.
As per the TipRanks star rating system, he is ranked 2,690 out of 7,979 analysts on TipRanks and 5,800 out of a total of 22,127 experts on the site. He has an average return of 2.1% per transaction with a success rate of 48%.
The TipRanks Star Ranking system is based on analyst success rates, average returns, and statistical significance. It also lists various analysts who cover stocks in various sectors, making it easier for investors to choose their options.
Let’s discuss the two stocks in detail.
Gamma Communications
Gamma is among the leading providers of cloud-based communications and software services in the UK and European markets.
The company delivered a strong performance in its recently announced interim results for 2022. Revenue increased by 8% to £234.7 million, and the pre-tax profits jumped by 18% to £38.7 million. The numbers were mainly driven by its indirect and direct business in its biggest market, the UK. The UK’s direct business is again profitable as the company has gained some new big contracts.
The company’s recurring revenue is also a positive highlight in the results which forms around 89% of its total revenues.
During the results, the company also announced a 14% hike on its interim dividend of 5.0p per share.
Talking about the outlook, the company is expecting huge demand from the growing flexibility of working options as well as a broader shift towards cloud-based solutions. The company expects its earnings for the full year to be on the higher side of the market forecast.
Gamma communications’ share price forecast
Patrick has recently reiterated his Buy rating on the stock but has reduced the target price from 2,150p to 2,000p.
According to TipRanks’ analyst rating consensus, Gamma stock has a Moderate Buy rating, based on two Buy recommendations.
The GAMA price target is 1,825p, which shows a change of 56.7% on the current price level. The price has a high forecast of 2,000p and a low forecast of 1,650p.
BT Group
BT Group is the world’s oldest telecoms company, an icon in the UK, and now has operations in around 180 countries. It’s a market leader in broadband services in the UK.
In the last six months, the stock has been volatile and is down by 20%. The company is also in the news thanks to a workers’ strike in a dispute over better pay.
The company’s profits have been a worry for the last few years. But, BT is off to a better start for the fiscal year 2023. The company reported a growth in revenues and earnings in the first quarter.
Revenues were up by 1% due to increased pricing, and the EBITDA increased by 2% from improved cost controls. The company faced some challenges from the previous year’s divestments impacting its revenues.
The analysts see the downturn in the stock as a buying opportunity considering its market-leading infrastructure, stable fundamentals, and an attractive dividend yield of 5.54%.
BT Group’s share price forecast
Patrick has a Buy rating on BT’s stock with a target price of 220p, which shows an upside of 58%.
According to TipRanks, BT stock has a Moderate Buy rating. This is based on four Buy and four Hold recommendations.
The BT Group target price is 199.0p, which is 43% higher than the current price.
Conclusion
Patrick believes the lower share prices of these companies make them more attractive based on their growth prospects for the second half of 2022 and 2023.
Patrick has a Buy rating on both the stocks.
