Desjardins upgrades BCE stock rating to Buy on US expansion plans

Desjardins upgraded BCE Inc. to Buy with a C$40.00 price target, citing a re-evaluation of the telecommunications giant's US expansion plans, which they now estimate will yield a 12% internal rate of return, suggesting the market's prior negative reaction was largely unwarranted despite competitive risks. This positive sentiment is reinforced by Scotiabank's concurrent upgrade to Sector Outperform, driven by optimism for improved Canadian wireless pricing, alongside BCE's Q1 2025 earnings meeting analyst expectations.

Analysis

BCE Inc. is experiencing a significant sentiment shift, evidenced by concurrent upgrades from two major financial institutions. Desjardins upgraded the stock to Buy with a C$40.00 price target, reassessing the company's US expansion. While Desjardins' projected 12% internal rate of return for the initiative is below management's 20% objective, the firm now views the market's prior negative reaction to the Ziply announcement as excessive. This upgrade is complemented by Scotiabank, which raised its rating to Sector Outperform with a Cdn$39.00 target, citing optimism for an improving wireless pricing environment in Canada. The positive analyst actions are supported by a stable fundamental backdrop, as BCE's first-quarter 2025 results met expectations with an EPS of $0.63 and revenue of $5.93 billion. Furthermore, the company's strong dividend profile, featuring a 5.53% yield and a 55-year payment history, combined with overwhelming shareholder approval for its board of directors, reinforces confidence in its governance and capital return policy.

Key Decisions for Investors

• Investors should re-evaluate BCE's risk-reward profile, as the dual analyst upgrades suggest the market may have overly discounted the stock following its US expansion announcement.
• Income-focused investors may find the 5.53% dividend yield particularly attractive, especially given the company's 55-year history of payments and the renewed analyst confidence in its strategic direction.
• It is prudent to monitor the execution of the US expansion for signs of its IRR performance and watch for evidence of the anticipated improvement in Canadian wireless pricing, as these are the core catalysts for the recent upgrades.