Telefonica (TEF) has inked a strategic partnership with viral video platform Tik Tok. The two are coming together to create unique ways for Tik Tok users to enjoy videos across Telefonica services. Additionally, they will partner on three areas of service distribution, as well as marketing campaigns and technological efficiencies.
The partnership will allow Telefonica to develop local co-marketing and strategic partnerships focusing on European and Latin American markets. The two also plan to merge marketing assets following the integration of Tik Tok Extra on Movistar, which is available on Telefonica’s TV Platform. (See Telefonica stock charts on TipRanks)
According to Telefonica’s Global Consumer Director Fabio Bruggioni, the Tik Tok partnership presents a unique opportunity to reach Millennials and Generation Z. Therefore, focus shifts to offering the target market superior service and ensuring the best experiences on their devices.
“Thanks to this new partnership, Telefónica customers will be able to share their passion, creativity and milestones in their lives through TikTok, and engage with the content on the platform with greater ease and convenience than ever before,” Bruggioni said.
Additionally, Telefonica plans to sell a 49% stake in its technology unit. Citing Cinco Dias newspaper, Reuters reports that the company has engaged KPMG and Morgan Stanley (MS) as advisors as it looks to raise as much as 500 million euros from the minority stake sale. The sale will allow the company to raise capital to reduce some underlying debt.
Last month, Berenberg analyst Carl Murdock Smith upgraded the stock to a Buy from a Hold with a share price target of $5.68, implying 26.11% upside potential to current levels.
According to the analyst, Telefonica stock is “over hated” even though the company has significantly reduced its debt. Additionally, the issuance of Latin American debt has allowed the company to address currency mismatch issues.
Consensus among analysts is a Moderate Buy based on 2 Buys and 1 Hold. The average Telefonica price target of $5.69 implies 26.44% upside potential to current levels.
TEF scores a 7 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to perform in line with market averages.
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