On Tuesday, Scotiabank made adjustments to its financial model for America Movil (NYSE:AMX), resulting in a decreased price target for the telecommunications company. The new target is set at $19.00, down from the previous $19.60, while the Sector Perform rating remains unchanged.
The changes introduced by the analyst are threefold: an incorporation of an additional $205 million in near-term EBITDA projections, an increase in capital expenditure requirements in Chile to $400 million up from $280 million, and a hike in yearly interest expenses by $100 million. The analyst noted that these revisions are primarily due to updated capital and EBITDA considerations for the company's operations in Chile.
Previously, the capital infusion of $280 million was offset by the lack of consolidated EBITDA in the firm's financial forecasts. With the new adjustments, the impact on the estimated free cash flow (EFCF) is minimal, which is why the price target has only been reduced slightly. Additionally, the analyst has taken this opportunity to revise currency assumptions for the Brazilian Real (BRL) and the Colombian Peso (COP).
The revised price target of $19.00 per American Depositary Receipt (ADR) equates to approximately 17.1 Mexican Pesos per share. This recalibration of America Movil's financial outlook reflects the updated capital and operational expectations as the company continues to navigate its business strategy.
In other recent news, America Movil, a leading telecommunications service provider, has reported strong first-quarter results for 2024, including a net addition of 1.5 million wireless subscribers and a total revenue of MXN203 billion pesos. The company has also confirmed a capital expenditure plan of $7.1 billion to $7.2 billion for the year, focusing on advancing its fiber and 5G infrastructure. In addition, America Movil has recently acquired control of their Chilean joint venture, ClaroVTR, increasing their ownership to 91%.
In the realm of analyst ratings, America Movil has received an upgrade to a Buy rating by Goldman Sachs (NYSE:GS) and was reaffirmed with a Buy rating by Citi. Conversely, Scotiabank maintained its Sector Perform rating for America Movil, following the Slim family's acquisition of a 3.16% stake in British Telecom.
In other developments, America Movil anticipates continued revenue growth across most markets, driven by bundling and competitive packages. The company is also investing in digital services and network management, particularly in Colombia and Brazil. This comes amidst a cybersecurity incident in Central America leading to the disconnection of 584,000 subscribers. Despite these challenges, the company's growth is being driven by its broadband and 5G network expansions in Mexico.
InvestingPro Insights
According to recent data from InvestingPro, America Movil (NYSE:AMX) presents a mix of stability and caution for investors. With a market capitalization of $52.16 billion and a P/E ratio that has adjusted to a more attractive 15.74 in the last twelve months as of Q1 2024, the company shows signs of reasonable valuation in the current market. The InvestingPro Data also reveals a gross profit margin of 42.27%, indicating a strong ability to retain earnings from sales. However, investors should note the company's revenue has declined by 4.43% over the last twelve months as of Q1 2024, which may reflect some of the operational challenges referenced in Scotiabank's report.
From the array of InvestingPro Tips, two particularly stand out for America Movil. First, the company has raised its dividend for 8 consecutive years, demonstrating a commitment to returning value to shareholders. This is further supported by the fact that it has maintained dividend payments for 24 consecutive years. Additionally, the company is trading near its 52-week low, which could present a potential entry point for value-seeking investors, especially considering analysts predict profitability this year. These factors, coupled with the company's status as a prominent player in the Wireless Telecommunication Services industry, could provide a compelling narrative for both current and prospective shareholders.
For those interested in a deeper dive into America Movil's financials and forecasts, InvestingPro offers additional tips and insights. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full suite of tips that can help inform your investment decisions. With 9 additional tips available on InvestingPro, investors can gain a comprehensive understanding of the company's financial health and market position.
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