Canaccord Genuity hikes target price on Zegona Communications

(Sharecast News) - Canaccord Genuity lifted its price target on Zegona Communications to 2,500p from 2,150p, saying the turnaround at Vodafone Spain was gathering pace and the business was now showing clear signs of renewed revenue growth.

Canaccord Genuity said Zegona has been "swiftly improving" margins and cash flow since acquiring Vodafone Spain, with the return to topline growth the final piece of the puzzle. Thirdquarter momentum carried into the fullyear results, with its subscriber base continuing to expand across fixed broadband and mobile, extending an 18month run of positive net adds.

FY26 revenues of �3.63bn beat expectations, with growth accelerating to 2% yearonyear in the fourth quarter. Adjusted EBITDAaL came in at �1.34bn, slightly ahead of forecasts and equivalent to a 37% margin, while gross free cash flow reached �714m, though reported FCF was held back by workingcapital, refinancing and restructuring oneoffs. Net debt of �3.2bn was in line with expectations, and Canaccord said a likely refinancing later this year could reduce annual interest costs to around �180m.

The Canadian bank also noted easing competitive pressure in Spain, particularly from MasOrange, which has recently lost mobile subscribers and slowed broadband growth following its ownership change. Vodafone Spain, by contrast, has been steadily rebuilding its low and midtier offerings without damaging average revenue per user.

Canaccord said Zegona's current 15x CY27 enterprise value-to-free cash flow multiple represented an "unwarranted" 27% discount to European incumbents such as Telef�nica and Orange. Its new �25 target was based on 20x CY27 EV/FCF, in line with peers, and includes �1.50 per share for Zegona's minority stakes in the PremiumFiber and FiberPass joint ventures.

Reporting by Iain Gilbert at Sharecast.com