On Monday, America Movil (NYSE:AMX), a leading telecommunications service provider, was reaffirmed with a Buy rating and a price target of $22.50 by Citi. The company has recently taken a significant step by acquiring control of their Chilean joint venture, ClaroVTR, which was previously shared equally with Liberty Latin America.
The acquisition came into play following Liberty's decision to not fulfill its funding commitments by the end of June, which were necessary to maintain its equal stake in the venture. Consequently, America Movil is set to convert some convertible bonds into shares of ClaroVTR, a transaction reportedly valued at $807 million, increasing their ownership to 91%.
The deal is considered to be cash-neutral and strategically beneficial for America Movil. It allows the company to regain control over a larger, more integrated operation in Chile. This move comes at a critical time as WOM Chile, a key competitor in the market, has recently filed for Chapter 11 bankruptcy.
Citi's position reflects a positive outlook on America Movil's strategic acquisition, which is expected to enhance the company's presence and synergies in the Chilean telecommunications market. The price target of $22.50 remains unchanged, indicating confidence in the company's growth trajectory following this recent development.
In other recent news, America Movil reported strong first-quarter results for 2024, including a net addition of 1.5 million wireless subscribers and a total revenue of MXN203 billion pesos.
Despite experiencing a cybersecurity incident in Central America leading to the disconnection of 584,000 subscribers, the company's growth is being driven by its broadband and 5G network expansions in Mexico. In line with these developments, America Movil confirmed a capital expenditure plan of $7.1 billion to $7.2 billion for the year, focusing on advancing its fiber and 5G infrastructure.
In the realm of analyst ratings, America Movil was upgraded to a Buy rating by Goldman Sachs (NYSE:GS), which cited competitive trends and new capital expenditure guidance as potential catalysts for a more favorable investment profile. Conversely, Scotiabank (TSX:BNS) maintained its Sector Perform rating and a $19.60 price target for America Movil, following the Slim family's acquisition of a 3.16% stake in British Telecom.
On a strategic note, the Slim family's history suggests this initial small stake purchase in British Telecom could lead to an increased position over time, potentially signaling a diversification strategy.
Lastly, America Movil anticipates continued revenue growth across most markets, driven by bundling and competitive packages, with the company also investing in digital services and network management, particularly in Colombia and Brazil.
InvestingPro Insights
As America Movil (NYSE:AMX) takes significant strides in the telecommunications industry with its recent acquisition of ClaroVTR, it's important to look at the company's financial health and market position. According to InvestingPro, AMX has a market capitalization of $52.53 billion and a solid P/E ratio of 16.94, suggesting that the stock may be reasonably valued in the context of its earnings. Notably, the company's P/E ratio has seen a slight adjustment to 15.98 when looking at the last twelve months as of Q1 2024.
InvestingPro Tips highlight that America Movil has a consistent track record of maintaining dividend payments, with dividends raised for 24 consecutive years, which could be a reassuring sign for income-focused investors. Moreover, the company is trading near its 52-week low, presenting a potential entry point for investors considering the stock's low price volatility. Analysts also predict profitability for the company this year, aligning with Citi's positive outlook and the $22.50 price target.
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