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Analyst removes 'sell' rating from Rogers, says challenge from Videotron overblown

TORONTO - With Rogers Communications (TSX:RCI.B) stock down nearly 12 per cent in the past six months — making it the worst performer among its Canadian peers — at least one analyst says the market seems to have factored in problems facing the Toronto-based company and overblown the potential for Videotron to challenge its wireless business.

CanaccordGenuity analyst Dvai Ghose has replaced its "sell" rating on Rogers with a "hold" but is maintaining his price target for the company at $41 per share. Telus (TSX:T) remains his top pick in the sector.

Rogers shares closed Wednesday at $42.01, up 84 cents from the previous close. Ghose issued a "hold" recommendation after the stock closed Tuesday at $41.17, down from $47.53 six months earlier on Jan. 15.

By comparison, shares of comparable Canadian companies are either flat or up over the same period.

Ghose writes that Rogers has an attractive combination of assets — Canada's largest base of wireless subscribers as well as its cable, Internet and media businesses.

He adds that last week's results from Calgary-based Shaw Communications (TSX:SJR.B) and Montreal-based Cogeco Cable Inc. (TSX:CCA) showed that they had slowed the loss of subscribers in the March-May quarter that overlaps the Toronto company's second quarter ended June 30.

Moreover, Ghose writes that he thinks there's been too much credence given to the emergence of a strong fourth wireless carrier to challenge Rogers, along with Telus (TSX:T) and Bell (TSX:BCE).

Quebecor's Videotron (TSX:QBR.B) is often mentioned as the most likely candidate to mount a fresh challenge to the Big Three, but Ghose said "there is no guarantee that Videotron will get the regulatory relief or partners required to launch national wireless."

"We find it hard to take the Videotron threat seriously," he said.

On the stock market, Quebecor shares are little changed from six months ago, closing Wednesday at $26.09 — up 1.6 per cent from $25.69 at the close on Jan. 16.

BCE closed at $$48.87 (up five per cent from $46.52), Telus at $38.56 (up 2.8 per cent from $37.50), Shaw at $27.68 (up 12 per cent from $24.72) and Cogeco Cable at $61.46 (up 23 per cent from $49.94).

— Follow @DavidPaddon on Twitter.

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