In Wednesday’s trade, Bharti Airtel’s shares fell for a second straight session after JPMorgan downgraded the company. Airtel’s share price has been slashed by JPMorgan from Rs 860 to Rs 710 and its target price lowered from overweight to underperforming.
Against yesterday’s close of Rs 792.85, the stock fell 5.15 percent to Rs 752, a loss of 8.21 per cent in two days. During the past two days, the scrip has lost 8.21 percent at today’s low level of Rs 752.
“It was expected that Airtel’s stock price would rise in 2022 as a result of another round of tariff hikes. However, that didn’t happen. As Bharti and (Reliance) Jio both aim to get a first-mover advantage by rolling out 5G services, 5G spectrum auctions at relatively high prices slowed tariff hikes.
Earning revenue from 5G: JPMorgan’s perspective
There are no compelling monetization drivers for 5G capex, which is another elephant in the room. Currently, consumer use cases are limited, while enterprise use cases have yet to be developed. The high capex keeps ROICs under pressure, which means telcos have to figure out how to monetize 5G,” the report said.
In its report, JPMorgan outlined three options. A direct increase in tariffs was followed by a direct increase in tariffs with the removal of the base plan. Finally, a reduction in the cost per GB drove greater data consumption. According to the investment bank, 4G-only players face a risk with this last option.
Technical overview
A support level of Rs 760, followed by Rs 750, and then Rs 740 provides support for the stock.
Over the last couple of trading weeks, Airtel has corrected more than 10% and has plunged towards the 200-SMA (Simple Moving Average) on the daily chart.
Based on the recent fall that brought the counter into oversold territory, a recovery should be expected since the 200-SMA historically cushions the counter. There is immediate support near Rs 740-750 (200 SMA-odd), which if breached could disrupt the technical setup.
“Bharti Airtel’s prospects are bearish as strong support is now at Rs 760. When this level is breached, targets of Rs 710-686 will be attained. Rs 826 remains strong resistance,” predicts Tips2trades’ AR Ramachandran.
In terms of relative strength index (RSI), Airtel has a 14-day reading of 33.63. An index below 30 indicates an oversold position, while an index above 70 indicates an overbought position. Its stock has an equity-to-equity ratio of 277.64, which is negative.
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