Q: Greetings 5i, I know that you have answered several recent questions on Telus including the dividend sustainability. But given the drop today (Nov 18) of >5%, which appears to be due to the JP Morgan downgrade, can you please refresh your thesis? Is the market reaction overdone? How does the current situation with Telus compare to that of BCE in the months leading up to its dividend cut? Thank you.
5i Research Answer:
JP Morgan is well-respected, so its downgrade carries some weight. We have some more comments on the company posted today. Generally, the media focus and downgrades have 'probably' pushed the price to buying levels. The stock has already hit JPM's and Veritas's recently-lowered price targets. We highly doubt the dividend will be cut less than a month after an increase. We are hearing about cost cutting and layoffs and T does seem to be focused on improving margins. The market reaction is probably accurate, but we would expect some stabilization and even gains now in the short term.