Safaricom Plc ’s rally to a record has made Kenya’s biggest company overvalued, with analysts forecasting a 10% drop in the next 12 months.
Shares of the Nairobi-based company rose to an unprecedented 43 shillings on Tuesday. The surge comes after Ethiopian authorities said they will allow Safaricom’s subsidiary to offer the lucrative mobile-money services in Africa’s second-most populous nation.
Ethiopia’s pledge to open up the industry is yet to impress analysts. None of the 10 analysts tracking Safaricom have had a buy recommendation on the stock since May 28. There’s also concern a conflict in Ethiopia’s Tigray region is spreading to neighboring areas and may hurt overseas investment into the nation. “The price is too high because what is fueling it is speculation on future earnings,” said Renaldo D’Souza, head of research at Nairobi-based Sterling Capital Ltd., who has a hold recommendation. “If anything the income has been declining so we have a fair valuation rather than a price target.”
Safaricom’s recommendation consensus — a gauge of analyst confidence in a stock on a scale of 1 to 5 — stands at 2.77, the lowest on record. Meanwhile, analysts’ 12-month target price for the stock is 38.61 shillings, according to data compiled by Bloomberg.
Safaricom declined to comment when contacted on Tuesday.