BCE downgraded to Hold at Canaccord after Ziply Fiber deal

As previously reported, Canaccord downgraded BCE (BCE) to Hold from Buy with a price target of C$41, down from C$51, after the company proposed to acquire Ziply Fiber and enter the U.S. fiber space. This deal is likely to place incremental near-term pressure on the investment thesis on “a number of fronts,” including lower free cash flow generation over the next three years, delayed easing in balance sheet leverage, and the incremental dilution from the DRIP introduction, via which the firm estimates almost $1B in new equity annually, the analyst tells investors. The firm recognizes the longer-term strategic case, but believes that the market will take a while to digest the multiple, especially considering the heavy capex phase over the next three to four years, the analyst added.