Inwit on a downward trend; Goldman Sachs downgrades it from ‘buy’ to ‘neutral’

(Il Sole 24 Ore Radiocor) - Selling pressure is concentrated on Inwit , one of the worst-performing shares on the FTSE MIB . At present, the tower company’s shares are trading at around 6.1 euros, down 3%, partly due to a new report from Goldman Sachs, which has downgraded its recommendation to ‘Neutral’ from ‘Buy’ and reduced the target price to 7.3 euros from 10.5 euros.

The main issue remains the contractual disputes with key customers, including Fastweb-Vodafone and Telecom Italia , which have heightened uncertainty surrounding the share. The Goldman team points out that their previous positive view on Inwit was based on the idea that “the structural concerns weighing on the share price, linked to satellite technology, the risk of consolidation and contract renegotiation, were overestimated”. However, “contractual disputes with customers, which intensified in March, have led to greater uncertainty and weighed on the shares”.

The investment bank still sees scope for a negotiated settlement, but considers the situation too complex to maintain its previous targets. “We expect a constructive outcome over time, likely involving some concessions in exchange for long-term volumes”, they write. In the new base-case scenario, Goldman estimates a potential upside of around 15% should Inwit return to trading in line with historical multiples, though this remains “subject to the price and volume that emerge from the negotiations”.

The most positive scenario, on the other hand, implies an ‘upside’ of around 50 per cent, whilst the worst-case scenario suggests a further decline. The point, however, is that “the potential upside arising from a resolution of the contracts is insufficient to offset the complexity of the Inwit investment case, linked to the broader uncertainties that remain”, the report states.