On Wednesday, Goldman Sachs adjusted its stance on Liberty Global LiLAC (NASDAQ:LILA) (NASDAQ: LILAK), lowering the stock from Buy to Neutral. The financial institution has also revised its price target to $10.50, up from the previous $9.30.
The adjustment follows a significant share price increase for the company, which has seen its stock rise approximately 30% since May 30, 2023, a performance that contrasts with the MSCI LatAm index's 1% decline over the same period.
The analyst from Goldman Sachs acknowledged the positive impact of mergers and acquisitions in recent years on Liberty Global (NASDAQ:LBTYA)'s competitive positioning in various key markets. These transactions, along with efficiency initiatives and the phasing out of integration costs in Puerto Rico, are expected to continue to contribute to margin expansion and support a positive momentum in sequential results, especially in the short term.
Despite the recognition of these positive factors, Goldman Sachs expressed growing concerns about the competitive landscape in Puerto Rico. Additionally, the recent share price rally has led to a diminished upside potential. The new 12-month price target suggests approximately 12% growth, which aligns with the average for Latin American Telecom, Media, and Technology (TMT) coverage by the firm.
The report also highlighted that Liberty Global's shares are trading at around a 5.5x enterprise value to EBITDA multiple for the year 2025 estimate, compared to an average of approximately 4.4x for Latin American telecom peers. High leverage was noted as a significant risk that introduces volatility into the investment thesis, although it may also present an upside risk if interest rates move favorably.
In conclusion, due to a less favorable risk-reward balance at the current stage, Goldman Sachs has decided to downgrade the rating for Liberty Global LiLAC shares to Neutral.
In other recent news, Liberty Latin America (LLA) presented robust growth and resilience in their second quarter of 2024 earnings call. The company reported an increase in high-speed broadband and postpaid mobile subscribers, adding 62,000 in the first half of the year.
Financial highlights included an adjusted OIBDA of $763 million, with significant growth in Panama and Costa Rica. LLA also repurchased over $300 million of equity and convertible notes as part of their buyback activity.
Strategic acquisitions and partnerships were announced, including a combination with Millicom in Costa Rica and the acquisition of spectrum and subscribers from DISH. Despite facing challenges due to recent hurricanes and in Puerto Rico, recovery efforts are underway.
CEO Balan Nair remains optimistic about future growth, projecting positive revenue growth for 2025 driven by investments in network infrastructure and data centers in Panama, Costa Rica, and Mexico.
These developments underscore LLA's strategic focus on expanding its market presence and driving stakeholder value, even amidst transient challenges.
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