On Thursday, JPMorgan downgraded shares of Bouygues (EPA:BOUY) SA (EN:FP) (OTC: BOUYF) from Overweight to Neutral, adjusting the price target to €37.00 from the previous €44.50. The firm's analysis suggests that while Bouygues is valued attractively based on 2025 estimates, with a 9x price-to-earnings ratio, a 13% equity free cash flow yield, and 4x enterprise value to EBITDA, there are concerns that estimates for the year may be too optimistic.
The downgrade reflects expectations that Colas, Bouygues' road construction business, will continue to face challenges through 2025 due to increasing headwinds in the United States and political uncertainties in France. These factors are anticipated to contribute to a decline in the segment's performance.
Additionally, following a recent guidance downgrade from Bouygues Telecom (BCBA:TECO2m), JPMorgan expresses concern that the mid-term consensus expectations for the telecom division might not have been sufficiently adjusted downward. This could lead to a misalignment with market expectations and potentially impact investor sentiment.
Furthermore, the acquisition of La Poste Telecom by Bouygues is now factored into JPMorgan's estimates. The firm cautions that this acquisition is likely to have a negative effect on Bouygues' EBITDA and equity free cash flow in the near to mid-term, before potentially becoming accretive in the long term. This could also influence the new 2026 outlook for Bouygues Telecom and may disappoint in comparison to what the market anticipates.
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