But also like many of its rivals, Craigs had a buy – or, at least, “overweight” rating on the beleaguered telco.
Craigs’ Wade Gardiner had a $3.13 12-month target – down from his previous $3.60 but still around one-third ahead of the telco’s price on Monday.
“The market has clearly lost confidence in the Spark story, but the share price reaction looks overdone,” Craigs said.
Morningstar slashes dividend forecast
Morningstar’s Sydney-based Brian Han headlined a Friday evening note, “Dark New Zealand findings”.
“Causes of the poor result were highly concerning … Spark’s cost base is fundamentally more bloated than we thought and they were not agile enough to respond to unexpected revenue weakness – some of which was more structural than were previously anticipated.”
Han added, “We cut our dividend per share forecasts by around 40% to 15cps from FY26 and project a hiatus at this level for a few years.”
‘Too many questions left unanswered
Jarden’s Arie Dekker asked question after question on the Spark’s post-results conference call on Friday. But he was left headlining his Monday morning note, “Too many questions left unanswered” following Spark’s “fourth downgrade in a row and a meaningful one, too”.
They included: “How has the IT business gone so wrong so quickly?”
He added, “While Spark has talked to the impact of mix in cloud and enterprise and government on service management, it has not addressed targets for a business with an element of free-fall”.
Dekker also asked: “Is 20 cents per share is the new aspirational target for the dividend, or is a deeper cut required?
Spark held its full-year dividend forecast at 25cps, noting the profit payout would be underpinned by $310 million in proceeds, due in the third quarter, from the sale of its remaining 17% stake in its celltower network – now held by Connexa. It said a capital management review was under way, which would include the dividend for 2026.
Dekker said he would hold his FY26 dividend at 20cps until he saw “greater clarity on the outlook for IT and Spark’s plans for data centres”.
On Friday, Spark had no update on its quest – first revealed with its full-year results report last August – to raise up to $1 billion to fund data centre expansion over the next five to seven years.
On Friday, Forsyth Barr analyst Aaron Ibbotson told the Herald, “It was a weak result across the board. There’s not really any redeeming features … The big surprise was that operating expenses basically hadn’t come down at all relative to last year and relative to how they guided.”
Only $8m had been shaved off Spark’s labour bill in the first half of $50m promised for the full year. And there was a surprise 5% rise in operating costs.
“The share price reaction today clearly is a reflection of shareholders being disappointed with the results, and potentially an indication that shareholders have lost a bit of faith in current management and board’s ability to turn it around,” Forsyth Barr analyst Aaron Ibbotson said during the Friday crash.
Those comments notwithstanding, on Monday morning Ibbotson and his colleague Benjamin Crozier upgraded Spark’s beaten-down shares from underperform to neutral – although they cut their 12-month price target by 11% to $2.50.
They called the first-half result “very weak” with “limited progress” towards targets but noted that the telco’s management was “steadfast” in its ambition to achieve its full-year cost-cutting targets. But they said Spark needed to take a “more ruthless approach to defining its core business. Does it remain the best home for fast-moving IT services, its ‘high-tech’ divisions, or large-scale data centres?”
Spark also needed “a meaningful reset of the dividend to a level covered by cash generation”.
“The earnings downgrade cycle and dividend jitters are likely to keep market sentiment depressed for some time,” Han said.
“But there is value if investors can look beyond the near-term earnings struggles.”
Han sees Spark’s fair value at $3.60, based on factors including its solid mobile business and its growing fixed-wireless business.
“Coupled with a benign regulatory environment, there is breathing room for Spark to consolidate its position and look for opportunities to reignite growth,” he said.
Jarden’s Dekker is also in the buy camp. He maintained his overweight rating, “on value support following a significant post 1H25 result selloff”, but reduced his 12-month target from $3.80 to $3.10.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
