Goldman Sachs resumed coverage on Telefonica S.A. (NYSE:VIV) with a Sell rating and a price target of $13.90, citing valuation concerns. The stock trades at $14.02, slightly above the target, with a P/E of 18.05.
The firm acknowledges Telefonica's strong position in the Brazilian telecom market, with growing bundled services reducing churn.
Goldman sees a 2026 free cash flow yield of 8.6% (7.6% ex non-recurring items), vs. 10.8% for peer TIMB. Current yield is 10%, with a 3.25% dividend yield.
However, FCF growth is expected to moderate due to high mobile penetration, limited upsell opportunities, and competition in fixed broadband.
FCF growth is projected at 8% and 11% for 2026-2027, down from 14% and 12% in 2024-2025.
Recently, Telefonica reported Q1 2026 EPS of $0.0753, missing the $0.1923 estimate. Revenue slightly beat at $2.98B vs. $2.95B.
The company also approved a capital reduction, returning R$1.2517 per share to shareholders.
