FALCOM retains “Neutral” on stc, raises TP to SAR 110

FALCOM Financial Services maintained its “Neutral” rating on Saudi Telecom Co. (stc), but revised the target price (TP) higher to SAR 110 per share.

The recent developments, namely the SAR 1 billion investment in three mega data centers in the Kingdom and the $500 million investment in the cloud service space, are likely to help stc benefit in the long term, the brokerage said in a research note.

It further indicated that increased competition in the telecommunications sector due to the government’s plans to grant two mobile virtual network operator (MVNO) licenses to foreign operators might hurt the company’s profitability in the coming years.

In addition, declined margins remain a source of concern for the company in the near term.

FALCOM expected stc to report a 1.6% year-on-year (YoY) rise in net profit to SAR 11.263 billion in 2021.

Neutral rating implies that the target share price is either more or less than the current share price by 10%, according to FALCOM.