Deutsche Bank has downgraded Telecom Italia and its savings shares to a “hold” rating from “buy,” citing overvaluation despite a 40% share price surge since October. Analyst Keval Khiroya cited the recent rally as making the shares reflect their underlying positives, including spectrum expiries and free cash flow turnaround. The bank raised target prices on both shares but maintained its underlying view on these catalysts.

The downgrade follows a 21% outperformance by Telecom Italia shares against the sector since October. Deutsche Bank highlighted €0.64 and €0.76 as new target prices for ordinary and savings shares respectively, up from previous estimates of €0.62 and €0.62. The analyst noted the €0.64 ordinary share target reflects a more cautious stance despite the recent gains.

Deutsche Bank did not alter its core thesis on spectrum expiries in 2029 or the free cash flow outlook, emphasizing the rally now incorporates these factors. This move signals a shift from bullish to neutral positioning as the shares price in their fundamental strengths.