Teleste: Valuation appears moderate following share price decline

Translation: Original published in Finnish on 24/11/2025 at 7:00 am EET.

We reiterate our EUR 4.1 target price for Teleste but, following the decline in the share price, raise our recommendation to Accumulate (was Reduce). Teleste's share price has decreased by 9% since our post-Q3 earnings update, bringing the share's valuation (2026e adj. P/E 11x) back to a moderate level. Teleste's expansion into North America has progressed well this year, which enables the company to continue its earnings growth in the medium term. However, slightly weaker order development in Q3 and the merger of the main customer in North America may cause short-term volatility in earnings development. Looking a few years ahead, the trend is still heading strongly in the right direction. 

Q3 saw expected improvement in earnings

Teleste's Q3 revenue grew by 15%, and its adjusted EBIT improved to 2.3 MEUR (Q3'24: 1.5 MEUR). Teleste thus continued its positive trend of improved earnings, supported by growing volumes, cost savings implemented by the company, and an improved gross margin, supported by factors such as a better product mix. With improved profitability and the release of working capital, cash flow from operating activities (4.6 MEUR) was also positive for the fifth consecutive quarter. However, orders received by Broadband Networks declined (-11%) after a strong start to the year (H1: + 44%). Public Safety and Mobility orders grew well (13%).

Guidance may increase near year-end

Teleste expects its revenue for 2025 to be 135-150 MEUR and its adjusted EBIT to be 4-7 MEUR, but the result is expected to be closer to the upper end of the guidance range. Considering the actual figures from previous months of 2025 (5.9 MEUR), the guidance for Q4 is quite cautious, and we predict an increase in the earnings guidance (7.4 MEUR). The outcome will be affected by the timing of certain Public Safety and Mobility projects around the turn of the year, for which visibility is poor. Teleste sees the growth outlook for Broadband Networks in North America as remaining strong this decade, supported by the DOCSIS 4.0 investment wave. In our view, uncertainty regarding short-term developments has increased (the merger between Cox and Charter may cause changes to investment plans). In the longer term, the merger also creates significant opportunities for Teleste, as Charter has not previously been a Teleste customer. Teleste has also won over smaller operators and is preparing for volume growth in North America by means of expanded production in Mexico, which also serves as a precautionary measure against tariffs and for optimizing working capital. European DOCSIS 4.0 investments appear to be significantly more moderate, and the longer-term market outlook remains downward. The outlook for Public Safety and Mobility has clearly stabilized after the challenges of recent years, and Teleste is seeking profitable growth exceeding the market rate in this segment. Considering recent performance, the segment appears to be developing very well in the right direction at present.

Valuation has fallen back to moderate levels

After several challenging years, Teleste's investor story has turned a new page this year, as earnings growth offered by the North American market has begun to materialize. Increasing volumes are now significantly contributing to Teleste's result, as the company has adjusted its cost structure in recent years and its business operations are in a stronger position structurally. This is reflected in the company's goal to achieve an adjusted EBIT margin of 7-12% by 2030. Although our forecasts are still more cautious than the company's targets, we expect clear earnings growth from the company in the medium term. Based on our estimates, the share valuation looks moderate already for next year (P/E 11x, EV/EBIT 9.6x) and will become attractive in the coming years (2027e P/E 9.7x and EV/EBIT 8.5x). Thus, following the price decline, we find the risk/reward attractive again.