Will Koninklijke KPN’s share price hit €2.96?

• Koninklijke KPN NV (AMS: KPN) shares tumble 1.5% to €2.775 per share
• America Movil could trim its stake in the Dutch telecom provider via convertible bonds
• Analysts foresee an improvement in KPN’s earnings per share in 2022-2024
• Trade Koninklijke KPN NV shares, long or short, with an IG account

Lacklustre stock price

Shares of Koninklijke KPN NV on the Euronext Amsterdam Stock Exchange fell 1.5% to end Friday (05 March) at €2.775, with 21.9 million shares changing hands.

Year-to-date, the Dutch telecommunications operator’s shares are still up 11%, compared to €2.49 at the end of 2020.

As of Saturday, 13 in 26 analysts recommended ‘buy’, 11 rated ‘hold’, while two had ‘sell’ calls. Their average 12-month price target was €2.96, which implied 6.7% upside based on Friday’s closing price, Bloomberg data showed.

In the US, the firm’s stock also trades over the counter, on the OTC Markets platform with the ticker symbol KKPNY. On Friday, the KKPNY counter finished 0.2% higher at US$3.365, on 291,152 shares traded.

America Movil bond sale

Between 22 February and 26 February, KPN shares tumbled 7.2%. That came after Mexican telecommunications firm America Movil raised €2.1 billion from selling three-year bonds that would be convertible into 672.4 million KPN shares, or 16% of KPN’s outstanding share capital.

If the bonds are converted, America Movil’s stake in KPN will reduce to 4%, from 20% as of end-2020.

UBS analyst Polo Tang said it was unclear what would happen to the bonds if there were a change of control at KPN. Such uncertainty around the implications for the Dutch telco’s near-term mergers and acquisitions were weighing on its shares, Tang added.

Nonetheless, he pointed out that fundamentals for KPN are improving, with revenue likely to stabilise or increase by the end of this year.

Reuters reported that KPN’s stock underperformance has fuelled rumours of a private-equity buyout. Such a deal will involve a premium for its shareholders, and potentially a large payout for buyers of the America Movil convertible bonds.

What’s next for Koninklijke?

The Netherlands-based group’s full-year revenue for 2020 totalled €5.3 billion, and earnings per share was €0.13.

Although some improvement in 4Q20 was fuelled by fixed-equipment sales and one-off wholesale revenue items, Bloomberg analyst Erhan Gurses believes the strong consumer fibre uptake and improving mobile-service trends bode well for KPN’s aim to boost mass-market revenue by the end of 2021.

In 2021, revenue could dip to €5.22 billion, according to average estimates of 20 analysts polled by Bloomberg. Earnings per share is expected to keep steady at €0.13 this year, the analysts forecast.

A recovery could be on the cards. Research teams’ average estimates of KPN’s earnings per share improved to €0.147 for 2022, and further rose to €0.164 for 2023 and €0.196 for 2024, Bloomberg data showed.