On Wednesday, Citi downgraded Liberty Broadband (NASDAQ:LBRDA) Corporation (NASDAQ:LBRDK) stock from Buy to Neutral, simultaneously reducing the price target to $57 from $67. The adjustment reflects concerns over the narrowing net asset value (NAV) discount and potential risks associated with its investment in Charter Communications (NASDAQ:CHTR).
The firm cited several factors influencing the downgrade, including a challenging organic broadband environment that may affect Charter Communications, Liberty Broadband's investment stake.
This environment is expected to become more difficult relative to consensus expectations, which could lead to downward pressure on estimates and valuation for Charter.
Moreover, Citi pointed out that the discontinuation of the Affordable Connectivity Program (ACP) could further impact broadband subscriber growth and revenue for the next 12 months. The firm also expressed skepticism towards the consensus 2025 EBITDA expectations for Liberty Broadband, suggesting they might be overly optimistic.
Despite these concerns, Citi acknowledged that Liberty Broadband has the option to increase its share repurchases, which could counterbalance some of the ownership limits imposed by maintaining its stake in Charter Communications at the 26% cap.
The new price target of $57 reflects revised estimates for Charter Communications and incorporates the risk of an elevated estimated NAV discount persisting. This reassessment by Citi signals caution regarding Liberty Broadband's near-term financial prospects.
In other recent news, Liberty Broadband Corporation has been in the spotlight with Rosenblatt Securities adjusting its price target for the company's shares to $80, down from $93, while maintaining a Buy rating. This adjustment is due to a lowered earnings cycle projection for Charter Communications, a company in which Liberty Broadband holds a significant stake.
Despite an uncertainty surrounding a potential merger between the two companies, Rosenblatt believes Liberty Broadband presents a more attractive investment opportunity for gaining exposure to Charter Communications.
In the company's first-quarter 2024 earnings call, Liberty Broadband reported solid EBITDA growth and a significant increase in mobile service revenue, despite a loss of 72,000 Charter subscribers.
The company plans to resume sales into Charter's buyback program and focus on debt reduction. Liberty Broadband is also considering share repurchases and potential spin-offs to address the discount in its net asset value.
These recent developments highlight Liberty Broadband's strategic plans amid challenging market conditions. The company's CEO, Greg Maffei, has expressed confidence in achieving EBITDA growth throughout the year and is actively exploring options to fully value its stock.
InvestingPro Insights
In light of Citi's recent downgrade of Liberty Broadband Corporation, a closer look at the company's financial metrics and market performance provides additional context for investors. According to real-time data from InvestingPro, Liberty Broadband's market capitalization stands at approximately $7.82 billion, with a P/E ratio of 9.21, indicating a potentially attractive valuation relative to earnings. Moreover, the company's gross profit margin over the last twelve months as of Q1 2024 is notably high at 75.0%, reflecting strong profitability in its operations.
InvestingPro Tips highlight that Liberty Broadband's liquid assets exceed its short-term obligations, providing financial flexibility. Furthermore, analysts predict the company will be profitable this year, which is consistent with its positive return on assets of 5.57% over the last twelve months. However, the company trades at high valuation multiples in terms of EBIT, EBITDA, and revenue, which may warrant caution. It's also worth noting that the stock has experienced a significant downturn over the past six months, with a price total return of -31.58%.
For investors seeking a comprehensive analysis, InvestingPro offers additional tips on Liberty Broadband, which can be accessed at https://www.investing.com/pro/LBRDK. Use coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking further insights that could inform investment decisions. There are currently 7 additional InvestingPro Tips available for Liberty Broadband, providing depth beyond the highlighted figures.
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