On Wednesday, UBS adjusted its stance on Cielo SA (CIEL3:BZ) (OTC: OTC:CIOXY), downgrading the company's stock from Buy to Neutral and revising the price target to R$5.75 from the previous R$6.00. This move comes in the wake of developments surrounding the tender offer by Bradesco and Banco do Brasil.
The new price target of R$5.75 per share aligns with the latest offer price of R$5.60, factoring in an estimated average Certificate of Deposit Interbank (CDI) rate of approximately 3% until the expected mid-August auction date. This estimate is based on a projected four-month timeline. The revised price target is also supported by updated estimates and discounted cash flow (DCF) analysis.
Recent events have seen a majority of Cielo's minority shareholders, representing 56% of the stake, reject a new appraisal report related to the tender offer on April 23. Additionally, a separate group of minority shareholders, holding 7% of the outstanding shares, has agreed to accept the tender offer at the newly proposed price.
UBS's decision to adjust the price target and downgrade the stock reflects the firm's assessment of the tender offer's progress and its implications for the value of Cielo SA shares. The financial institution has recalibrated its expectations to align with the offer price and the anticipated completion timeline of the transaction.
InvestingPro Insights
In light of UBS's recent adjustment of Cielo SA's stock rating, a glance at the real-time data from InvestingPro reveals additional facets of the company's financial health and market performance. Cielo SA (CIOXY) is currently trading at a low P/E ratio of 6.98, which, when viewed alongside its near-term earnings growth, suggests the stock may be undervalued. This is reinforced by a strong free cash flow yield, as indicated by InvestingPro metrics. Moreover, the company has consistently paid dividends to shareholders, boasting a significant dividend yield of 5.47% as of the latest data, and has maintained dividend payments for 16 consecutive years.
InvestingPro Tips also highlight that Cielo SA is a prominent player in the Financial Services industry and has experienced a large price uptick over the last six months, with a 38.2% price total return. This performance is particularly notable given the stock's low price volatility, which may appeal to investors seeking stability. For those interested in delving deeper, InvestingPro offers additional insights, including an analysis of the company's valuation and profitability. Readers can discover more InvestingPro Tips by visiting the dedicated page for Cielo SA at https://www.investing.com/pro/CIOXY, and can take advantage of an exclusive offer using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 12 more tips available on InvestingPro, investors have a wealth of information at their fingertips to make informed decisions.
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