UBS Boosts Elisa Oyj to Buy Amid Rare Dividend Yield Spike

UBS shook up the Finnish telecom scene by upgrading Elisa Oyj (HEL:ELISA) from neutral to buy. The Swiss bank now pegs the price target at €45.7, down from €49.3, citing what it sees as an overreaction to recent competitive pressures that sent shares tumbling 20% since September.

Despite the pullback, Elisa isn't just standing still. The company has maintained a steady 3% growth in revenues and launched an aggressive restructuring plan aimed at a 5% CAGR in EBITDA between 2025 and 2028. Their net debt to EBITDA ratio currently sits at a manageable 1.7x, indicating financial health that's well above sector averages. Plus, the dividend yield has hit a decade-high 6.5%, signaling a potentially attractive payout environment.

Looking ahead, UBS anticipates EBITDA growth of 6% in 2026 and 5% in 2027, marking Elisa's best expansion pace since 2017. An efficiency push backed by a €40 million cost-saving initiative, representing roughly 5% of projected 2025 EBITDA, is driving this optimism. It's Elisa's biggest transformation effort in recent memory.

However, the Finnish mobile market is currently losing steam. Growth slowed sharply from mid-single digits in 2022-2024 down to just 2-3% in 2025. The trend includes a yearly drop of 40,000-60,000 SIM cards since 2023, as consumers tighten belts amid economic uncertainty and favor fixed fiber connections over mobile dongles.

Even with macro headwinds, Elisa has managed to outperform its rivals Telia (HEL:TELIA) and DNA. UBS projects a modest annual mobile revenue growth of 3.2% through 2028, below the company's own forecast of over 4%. This slower growth reflects a mix of 5G adoption, accounting for about 1.5 percentage points annually, and price adjustments adding roughly 1-1.5 percentage points each year.

The broker also anticipates that the fourth quarter of 2025 might represent a low point for mobile service revenue, challenged by seasonal promotions and the debut of Elisa's Giga MVNO offering. Mobile revenue growth is expected to bottom out around 2.5% in the near term.

Financially, UBS expects Elisa to generate revenues around €2.26 billion alongside an EBITDA near €780 million in 2025. These near-term figures slightly undershoot consensus estimates but turn upward for 2026 and 2027, where UBS forecasts outperform the street by nearly 1% and 2.2% respectively.

UBS's valuation model employs a 7% weighted average cost of capital, suggesting the current €37.30 stock price implies a gentle contraction in growth to -0.4%, a sharp departure from prior assumptions of 1.5-2%. Their new price target anticipates a terminal growth rate of 1%. Notably, the Finnish mobile virtual network operator (MVNO) market remains niche, comprising just 1% of market share, which UBS argues limits competitive threats. The major players appear set for a stalemate, with Elisa holding a solid 43% share of Finland's mobile market.