Goldman Sachs Flags Telecom Stocks With Amplified Upside Potential

Goldman Sachs has revised its stock-picking framework to focus on leverage and relative returns improvement in Europe's telecom sector, citing a 'second phase' of surging free cash flow and balance sheet optionality.

The broker named BT, Deutsche Telekom, Telefonica, and Vodafone as top 'higher risk/reward' Buy ideas, with each offering outsized equity upside amplified by gearing. BT carries the highest upside at 62%, with a price target of 330p, due to fibre monetization at its wholesale broadband arm, Openreach.

The broker expects broadband line losses to ease and Group revenue growth to rebound to just under 2% by FY29, though it flags altnet fibre competition as a key risk. Deutsche Telekom offers 41% upside with a €40 target, driven by T-Mobile US's sustained growth, which accounts for roughly 80% of DT's 2027E free cash flow.

Telefonica is rated 'buy' with 34% upside and a €4.90 target, underpinned by an improving growth outlook in Spain and Brazil alongside ongoing cost-cutting. Vodafone was upgraded to 'buy' from 'sell,' with 30% upside and a raised target of 155p, driven by accelerating ROIC improvement.