HSBC downgrades T Mobile, Deutsche Telekom amid risks in broadband market

Investing.com -- HSBC downgraded Deutsche Telekom AG Na (ETR:DTEGn) to "hold" from "buy" on limited upside potential for T-Mobile US Inc (NASDAQ:TMUS) and increasing risks in the German broadband market.

The brokerage raised its price target on Deutsche Telekom (OTC:DTEGY) to 36 euros from 34 euros, reflecting a higher target for T-Mobile US at $270 from $260, but noted that valuation concerns and macro risks in Germany warrant a more cautious stance.

Deutsche Telekom has delivered a total return of 67.8% over the past year, largely driven by a 69.4% surge in T-Mobile US shares. However, HSBC said T-Mobile US appears fully valued after a significant re-rating, with its shares trading at an 18% premium to the S&P 500.

HSBC also highlighted emerging risks in Germany’s broadband market, where Deutsche Telekom faces competitive pressures, particularly from Vodafone’s pricing strategies. The brokerage warned that increasing pricing tension could weigh on sentiment and limit the potential for a re-rating of Deutsche Telekom’s non-U.S. business.

While Deutsche Telekom’s valuation remains undemanding, HSBC sees little scope for further upside in the absence of additional gains from T-Mobile US. The brokerage’s revised target price implies no further upside from current levels.

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