Wednesday, Rosenblatt Securities increased its price target on shares of Liberty Broadband (NASDAQ:LBRDA) Corporation (NASDAQ:LBRDK) to $91 from $80, while maintaining a Buy rating on the stock. The firm's decision comes after a period of underperformance in Liberty Broadband's stock price compared to its peers and the broader market.
Year-to-date, Liberty Broadband's shares have declined by 21%, a steeper drop than Charter Communications (NASDAQ:CHTR), which saw an 8% decrease. In contrast, the S&P 500 index has gained 14% over the same period.
However, in the last three months, shares of Charter Communications have rebounded by 30%, with Liberty Broadband's stock following at a 20% increase.
This recent uptick occurred after concerns over the loss of Affordable Connectivity Program (ACP) subsidies, which were expected to negatively impact broadband subscription counts, were less severe than anticipated.
The analyst noted that Liberty Broadband's current market valuation is nearing record discounts when compared to the worth of its 26% stake in Charter Communications. According to the firm, if Liberty Broadband's shares were valued in line with its Charter stake, they would be 58% higher.
The firm also suggested that the discount could potentially be narrowed through a merger between Liberty Broadband and Charter Communications, although the timing of such an event remains uncertain.
Additionally, the updated estimates from Rosenblatt also take into account the performance of Liberty Broadband's GCI business. GCI, which operates primarily in Alaska, has been experiencing very muted growth in its core communications services operations.
In summary, Rosenblatt's revised price target reflects the increased value of Liberty Broadband's holdings in Charter Communications, despite the current lag in Liberty Broadband's share performance compared to its intrinsic value as indicated by its Charter stake.
In other recent news, Liberty Broadband Corporation reported mixed results for the second quarter of 2024. The company announced the issuance of $860 million of the 3.125% Charter exchangeables and the extension of the margin loan maturity to 2027.
Despite losing 149,000 broadband subscribers, largely due to the end of the ACP program, Charter Communications, the parent company, saw improved broadband trends and a 2.6% increase in EBITDA. In a first, the company's mobile division reported profitability with 557 mobile line net additions.
GCI, a subsidiary of Liberty Broadband, experienced revenue growth driven by data sales. Meanwhile, Liberty TripAdvisor (NASDAQ:TRIP) is exploring strategic options and has seen positive outcomes from their strategy work. Liberty Broadband ended the quarter with $73 million in cash and $3.7 billion in debt.
Charter Communications expects continued EBITDA growth for the remainder of the year and has plans in place to reduce leverage. These developments come amid ongoing discussions between Liberty TripAdvisor, Certares, and TripAdvisor on potential transactions, and increased fiber activity by T-Mobile and others, validating the need for fixed lines.
InvestingPro Insights
Amidst the recent market movements, InvestingPro data shows that Liberty Broadband Corporation (NASDAQ:LBRDK) is trading at a P/E Ratio of 11.25, with a slight adjustment in the last twelve months as of Q2 2024 to 10.64. This valuation comes at a time when the company is experiencing a slight revenue decline of 0.81% in the same period, though it maintains a strong gross profit margin of 74.72%. Despite these figures, analysts have a positive outlook on the company's profitability, underlined by a notable 14.78% price total return over the past month and an 18.24% return over the last three months.
Two InvestingPro Tips that stand out for Liberty Broadband include the company trading at a low revenue valuation multiple and the fact that its liquid assets exceed short-term obligations. These tips suggest that the company is in a stable financial position, which could be reassuring for investors considering the firm's stock in light of recent underperformance. For those interested in a deeper analysis, there are additional InvestingPro Tips available that could provide further insights into Liberty Broadband's financial health and stock performance.
The Rosenblatt Securities' recent price target adjustment to $91 reflects optimism about Liberty Broadband's intrinsic value, particularly its stake in Charter Communications. The InvestingPro data and tips provide a more nuanced view of the company's current market position, offering investors a comprehensive understanding of its financial metrics and analyst expectations. With a fair value estimated at $78.27 by InvestingPro, investors may find that the stock has room to grow towards the analyst's target.
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