M2 jumps on buy calls

The telco's share price has risen on buy calls from Citigroup and RBS Morgans following its poor performance since August.

M2 Telecommunications (MTU) has bounced after brokers said its recent share price fall provided investors with a good opportunity to buy the stock.

The Uncapped 100 company jumped 2.8% to $6.16 at 1338 AEST following the reports to clients from Citigroup and RBS Morgans, adding to its 3.8% gain on high volume on Friday – its biggest two-day rise in six months.

Citigroup upgraded its recommendation to "outperform" from "neutral" and maintained its price target at $6.85. As well as opportunity from the share price weakness, it said that with most of M2's staff now in Manila, the company would be able to leverage that into more sales, driving profits for the medium term.

RBS Morgans rates the telco a high conviction buy. It says the drop in its share price since it reported a record result in August, which sent the stock up to a record high of $7.06, makes MTU cheap with a price-earnings ratio of 11 times, given that guidance is set for underlying earnings of 50 cents a share.

Before M2's rise today and on Friday, the stock had slumped 18.3% to $5.77.

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