Bharti Airtel: UBS downgrades the telecom stock to ‘sell’ after a 20% YTD rally. Is a trend reversal on cards?

Bharti Airtel share price dropped over 2 per cent in intraday trade on the BSE on Friday, July 11. The telecom stock opened at ₹1941 against its previous close of ₹1965.10 and dropped over 2 per cent to an intraday low of ₹1,917.45. Around 12:45 PM, Bharti Airtel share price traded 2.24 per cent down at ₹1,921.05, looking set to extend losses to the third consecutive session.

Despite the recent weakness, Bharti Airtel's share price has seen significant gains of over 20 per cent year-to-date (YTD) compared to a 5 per cent rise in the equity benchmark Sensex.

Even in a slightly longer timeframe of the last one year, shares of the telecom heavyweight have jumped almost 34 per cent, while the Sensex has risen by barely 3 per cent.

Bharti Airtel shares hit a 52-week high of ₹2,045.50 on July 2 this year after hitting a 52-week low of ₹1,421.55 on July 12 last year on the BSE.

Presenting its broader outlook on the Indian telecom sector, global brokerage firm UBS downgraded its ratings on Bharti Airtel to a sell from a neutral earlier. However, UBS has raised Bharti's target price to ₹1,970 from ₹1,705 earlier.

UBS said while its FY26 consolidated revenue estimates remain largely unchanged for Bharti Airtel, its estimates for the medium term are up 5-7 per cent, as a result of which EPS (earnings per share) is up 2-3 per cent.

"This, coupled with roll forward of our estimates, leads to our target price increasing from ₹1,705 to ₹1,970," said UBS.

UBS expects a 10 per cent ARPU (average revenue per user) CAGR for Bharti Airtel over FY25-28, driven by a nearly 10-12 per cent tariff hike in FY26. However, later years may be largely driven by secular factors.

The global brokerage firm further said that even the FY26 tariff hike, which the market appears to have discounted, faces the risk of being delayed or coming in at a lower magnitude than anticipated.

"With improving FCF (free cash flow) generation and balance sheet strength, we expect Bharti to start ramping up dividend payouts from FY26, but we expect yields to still remain sub-3 per cent by FY28," UBS further added.

(This is a developing story. Please check back for fresh updates.)

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