On Friday, Citi resumed coverage on Liberty Global (NASDAQ:LBTYA) stock with a Buy rating, setting a price target of $25.00. The firm highlighted the potential for significant value revelation in the near future due to strategic corporate actions.
Liberty Global's current holding discount, which implies a negative equity value for its operating company holdings, is seen as an opportunity for upside.
Liberty Global is anticipated to benefit from an upcoming Capital Markets Day (CMD) and the planned listing of its Swiss assets by the end of fiscal year 2024. These events are expected to play a key role in demonstrating the underlying value of the company.
Despite the challenges faced in 2022 due to rising interest rates which impacted highly leveraged telecommunication companies, Citi suggests that the trend may reverse as the credit environment improves.
The company's operating companies (OpCos) have reported slight declines in subscriber numbers, but Liberty Global has managed to implement price increases to maintain stable revenue. As the OpCos continue to expand their fiber networks, improvements in key performance indicators (KPIs) are also expected.
Citi has initiated a 90-day positive catalyst watch on the stock, marking the upcoming Sunrise CMD as a pivotal moment that could help alleviate the holding discounts currently reflected in Liberty Global's valuation. This watch period indicates a heightened expectation for positive developments that could influence the stock's performance.
In other recent news, Liberty Global's performance in the second quarter was mixed according to Bernstein SocGen Group, which maintained its Outperform rating on the company with a steady price target of $24.70.
The firm noted that while revenue was soft in the UK and Belgium, it met expectations in other regions, and EBITDA showed strength in the Netherlands.
However, Liberty Global's Free Cash Flow decreased by 21% year-over-year due to increased capital expenditures in Belgium and Switzerland. Despite this, the company's performance is seen as part of its transitional phase through 2024.
In other developments, Liberty Global, a partner in Virgin Media O2, is planning a significant event, the Swiss spin-off, anticipated to be a major step in the company's strategy. The company also reported a strong balance sheet with $3.2 billion in consolidated cash and $3.9 billion including liquid securities.
Virgin Media O2, on the other hand, reported a loss of 118,400 mobile contract customers in the second quarter, attributed to stagnation in high-end market innovation. Despite this, the company's expansion into fibre networks shows growth.
Finally, Virgin Media O2 reported a 1.4% drop in revenue for the quarter compared to the same period last year, totaling £2.7 billion. The decrease is mainly due to the weak performance of the mobile handset market.
Correspondingly, the adjusted core earnings decreased by 1.6%, amounting to £998 million. These are some of the recent developments that investors should keep an eye on.
InvestingPro Insights
As Liberty Global (NASDAQ:LBTYA) prepares for key strategic events, including the planned listing of its Swiss assets and an upcoming Capital Markets Day, insights from InvestingPro suggest several factors that could influence investor perspectives. Notably, management's aggressive share buyback program underscores confidence in the company's value proposition. This is complemented by Liberty Global's impressive gross profit margins, which stand at 67.19% over the last twelve months as of Q2 2024, reflecting operational efficiency and a strong competitive position in the market.
Moreover, the company trades at a low Price/Book multiple of 0.38, suggesting that the stock may be undervalued relative to its net asset value. This aligns with Citi's assessment of the potential for significant value revelation in the near future. While analysts do not anticipate profitability for the current year, and the company has not been profitable over the last twelve months, the InvestingPro platform offers additional guidance with 15 more InvestingPro Tips for investors seeking a deeper analysis (https://www.investing.com/pro/LBTYA). These tips can provide further insights into the company's financial health and market position.
With a market capitalization of $6.98 billion and a revenue growth of 3.96% over the last twelve months as of Q2 2024, Liberty Global is demonstrating its ability to grow despite market challenges. As investors and analysts watch for the outcomes of the company's strategic initiatives, these InvestingPro data points and tips can offer valuable context for understanding the company's potential for future performance.
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