Shares in calls and broadband supplier TalkTalk (TALK) are one of the best performing across the FTSE All-Share index in early trade on Thursday as analysts at Barclays lift their mood over the firm’s prospects.
At one stage the stock was up to 135p this morning, easing off to 132.7p as of 9.30am, but that still means a more than 7% jump on yesterday’s 123.6p close.
Barclays raising its recommendation on the company from ‘equal weight’ to ‘overweight’ is the reason for the share price rally.
DIFFERENT TO BUY, SELL, HOLD
This is based on a three tiered recommendation system; overweight, equal weight and underweight, a more nuanced (and perhaps less clear) structure than the ‘buy’, ‘sell’ or ‘hold’ calls classification.
The calls refer to the amount of an individual asset an investor should hold within a portfolio proportionate to a benchmark.
Based on 31 July data from FTSE Russell, which runs the UK stock market indexes, the FTSE All-Share had a combined market value of just shy of £2,490bn. On TalkTalk’s market cap of roughly £1.42bn (on Wednesday’s close), it means the telecoms company is worth 0.056% of the FTSE All-Share.
In other words, if an example investor had an investment portfolio worth £100,000, TalkTalk would be worth £56 of it.
That Barclays has now switched to an overweight call implies that our example investor is advised to own a bit more than £56 worth of TalkTalk stock in that same portfolio.
NO RINGING ENDORSEMENT
It is hardly a ringing endorsement for the company, which faces substantial operational headwinds and challenges, reflected in the mixed views of City analysts. Of the 16 analysts that cover the stock (according to Reuters) five still say sell, seven sit on the fence with hold calls, and only four have slapped buys on the shares.
Illustrating that point, it’s worth noting that TalkTalk shares are down nearly 13% year to date (even after today’s rally) and have collapsed from highs of 407.9p in the past three years or so.
