On Friday, Scotiabank updated its outlook on Millicom International Cellular SA (NASDAQ:TIGO) shares, raising the price target to $30.00 from the previous $26.80. The firm maintained its Sector Outperform rating on the company's stock. The upgrade follows a recent decline in Millicom's stock price, which dropped 10% since early June.
The bank's analyst pointed out that the decline was due to reasons that should not affect Millicom's projected equity free cash flow of $550 million for the current year. The analyst highlighted that the anticipated equity yield of 14.0% is significantly higher than the yield-to-maturity of Millicom's bond due in 2032, which stands at 7.35%. This discrepancy is seen as having potential consequences for the company's mergers and acquisitions strategy, valuation, and future cash flow distribution to shareholders.
The analyst also noted that at the current levels, Millicom could have the capacity to repurchase over 50% of its shares outstanding by 2029, if not sooner. The reassessment of a legal issue in Costa Rica, previously considered a concern, now appears to be of less relevance, according to Scotiabank's analysis.
Moreover, the $550 million cash flow guidance does not take into account any possible net benefits from the ongoing sale of LATI, Millicom's tower portfolio. The increased price target to $30.00 reflects the firm's confidence in the company's financial prospects and the robust cash flow that is expected.
In other recent news, Millicom International Cellular SA reported a robust financial performance for the first quarter of 2024, with service revenue reaching a high of $3.8 billion. The company's EBITDA margin hit a record 36.5%, and operating cash flow saw an organic increase of over 50% compared to the previous year.
Millicom aims to achieve an equity free cash flow of around $550 million in 2024 and reduce its leverage ratio to 2.5x by 2025. In addition to these financial highlights, the company announced leadership changes with Marcelo Benitez set to become CEO.
On the analyst front, JPMorgan initiated coverage on Millicom, assigning an Overweight rating to the company's stock and setting a price target of $30.00 per share.
This rating aligns with the previous rating held for the company's Swedish Depository Receipts, which JPMorgan ceased to cover. The firm's analysis and estimates for Millicom are consistent with a report from May 2024.
These recent developments indicate a strong financial performance and positive analyst coverage for Millicom. It's important for investors to note these updates as they reflect the company's current financial standing and market expectations.
InvestingPro Insights
Following Scotiabank's positive outlook on Millicom International Cellular SA (NASDAQ:TIGO), current metrics from InvestingPro further inform investors about the company's financial health and market performance. With a significant market capitalization of $3.93 billion and a robust revenue of $5.779 billion over the last twelve months as of Q1 2024, Millicom's financial scale is evident. The company's gross profit margin stands impressively at 73.75%, underscoring its ability to maintain profitability.
InvestingPro Tips suggest that Millicom is expected to see net income growth this year, which aligns with analysts' predictions of profitability. Moreover, the company has demonstrated a strong return over the last three months, with a 18.7% price total return, and an even more striking six-month price uptick of 28.09%. These figures may entice investors looking for companies with positive momentum. However, it is important to note that Millicom does not pay dividends, which might influence investment decisions for those seeking regular income streams.
For readers seeking further insights and analysis, there are additional InvestingPro Tips available for Millicom at https://www.investing.com/pro/TIGO. Take advantage of these by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With these tools at your disposal, informed decisions can be made to refine your investment strategy.
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