Summary
Deutsche Bank downgraded Telecom Italia and its savings shares to "hold" from "buy" after the stock's roughly 40% advance since the start of October, according to a note from analyst Keval Khiroya. Although the bank nudged up its target prices, it said the recent surge means the shares are increasingly reflecting the favorable developments that initially justified the upgrade.
Target prices and last closes
The bank raised its target on Telecom Italia's ordinary shares to 0.64 from 0.62. Those ordinary shares last closed at 0.647. Deutsche Bank also raised its target on the savings shares to 0.76 from 0.62; the savings shares last closed at 0.75.
Why Deutsche Bank changed its stance
In October Deutsche Bank had upgraded Telecom Italia to "buy," citing two central drivers: the timing of spectrum expiries in the Italian market and an expected turnaround in free cash flow that could unlock greater cash returns. The bank's note highlighted that about 70% of spectrum in Italy expires in 2029 - a development the bank viewed as a potential catalyst for consolidation ahead of that date. The free cash flow improvement was cited as another structural support for the shares.
"These supports are still valid but in the context of the shares which are increasingly discounting these benefits," Khiroya said, as quoted in the note.
Deutsche Bank noted Telecom Italia has outperformed its sector by 21% over the same period since October. While the bank did not alter its underlying view on the significance of spectrum expiries or the trajectory for free cash flow, it said the recent rally means the share price now largely reflects those factors.
Context for market participants
The downgrade reflects a shift in recommendation driven by valuation and relative performance rather than a change in the bank's core assumptions about the company's catalysts. Investors monitoring Telecom Italia's equity and debt markets may weigh the bank's updated call alongside the unchanged fundamental expectations on spectrum timing and cash generation.