Goldman Sachs Flags Top European Telecom Stocks With Amplified Upside Potential

Goldman Sachs has adopted a more optimistic stance toward European telecoms, pointing to what it describes as a "second phase" of robust free cash flow growth and balance-sheet flexibility.

In a recent research report, Goldman's Digital Infrastructure group adjusted its stock-selection framework to place greater emphasis on leverage and improvements in relative returns. It singled out BT, Deutsche Telekom, Telefonica, and Vodafone as its preferred "higher risk/reward" Buy recommendations, contending that all four offer substantial equity upside magnified by gearing, albeit accompanied by more pronounced company-specific risks.

BT has the largest upside potential among the four, estimated at 62%, with a 330p price objective. Goldman argues that fibre monetisation at BT's wholesale unit Openreach is central to its investment thesis, and its free cash flow projections for FY2027E run roughly 20% above consensus.

The investment bank forecasts that broadband customer attrition will ease and group revenue growth will rebound to just below 2% by fiscal 2029, while highlighting competition from alternative network fibre providers as a key downside risk.

Deutsche Telekom is seen offering 41% upside with a €40 target price. Goldman's confidence relies heavily on T-Mobile US, which is expected to account for approximately 80% of Deutsche Telekom's 2027E free cash flow and remains well-positioned in what Goldman calls a "rational 3-player" U.S. market.

Goldman anticipates that investor concerns over a possible combined Deutsche Telekom and T-Mobile US listing, as well as satellite competition, will diminish as T-Mobile US delivers sustained growth.

Telefonica is rated "buy" with 34% upside and a €4.90 target, underpinned by an improving growth outlook in Spain and Brazil alongside ongoing cost-cutting initiatives.

Goldman's EBITDA forecasts for 2026-2028E are 1-3% above consensus. It also points to potential value-accretive consolidation opportunities in Germany or Spain, while flagging near-term financing risks tied to any M&A activity.

Vodafone has been upgraded from "sell" to "buy," with 30% upside and a raised price target of 155p. Goldman cites accelerating ROIC improvement driven by UK mobile market repair, deeper cost-cutting, and sustained African growth, noting that its estimates are now above consensus for the first time in years.

The broker acknowledges that Vodafone's underlying structural quality remains below the sector average, particularly given execution concerns in Germany's fixed broadband market.

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